Another risk factor is the concern that Bitcoin may never become a widely used transactional currency due to its issues with speed and scale. Yes, the Lightning Network (LN) promises to solve many of the issues associated with speed, cost, and scale, but there is no guarantee that the LN will become widely adopted, even over time.

Therefore, there is the risk that newer and more efficient digital currencies like LiteCoin, Bitcoin Cash and others will make Bitcoin somewhat obsolete as an actual medium of exchange for the masses.

Continued Security Breaches and Fraudulent Activity

Continued security breaches in the Bitcoin world concerning exchanges and individual wallets is a constant concern. If significant breaches continue, investors and users may start to lose confidence in the system and demand could decrease as a result.

Likewise for fraud cases. In an industry that is relatively loosely regulated, substantial fraudulent activity is a persistent risk. Just like with security breaches, when people get ripped off, it reflects poorly on the entire industry and demand along with prices can suffer.

One Million and One Cryptocurrencies

Another concern is the seemingly endless supply of new cryptocurrencies. There are now over 2,000 different cryptocurrencies listed on CoinMarketcap.com. The risk is that the market may become oversaturated with digital assets which could lead to a crash, or to a devaluation of many digital assets, including Bitcoin.

Loss of Interest Amongst the Masses

There is always the simple risk of loss of interest amongst the masses. There is a chance that Bitcoin will forever remain a niche phenomenon, a novelty, as JPMorgan’s Jamie Dimon puts it. In this case, Bitcoin may not experience substantial demand, and the price would very likely cascade much lower over time.

Bitcoin is Not for Everyone

The bottom line is that Bitcoin is not for everyone. I view it as an investment for people with a relatively high risk tolerance, and even then, maybe only 5-10% of a portfolio’s holdings should be allocated to digital assets.

Bitcoin is still a relatively new phenomenon and no one truly knows exactly how it is going to play out over the long term. The truth is that 10 years from now one Bitcoin could be worth $1 million, or it could be worthless, and given the number of uncertainties, neither outcome should really shock people.

If you enjoyed reading this article, hit the “Like” button, and if you’d like insight about my future ideas, press the “Follow” link. Thank you for taking the time to read my article, and I hope that the information was helpful!

Disclaimer: This article expresses solely my opinions, is produced for informational purposes only, and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions very carefully.

Want more? Want technical analysis, trade triggers, trading strategies, portfolio insight, option ideas, price targets, and much more? To learn how to best position yourself for a rally in Bitcoin, and to find out about other high alpha investments, please consider joining Albright Investment Group.

  • Subscribe now and receive the best of both worlds, deep value insight coupled with top-performing growth strategies.
  • Join and get access to FULL ARTICLES that include technical analyses, trade triggers, trading strategies, portfolio allocations, price targets, options ideas, and much more.
  • Enjoy access to my best investment ideas, and trade alongside AIG’s top-performing core long portfolio that has outperformed the S&P 500 by about 73% over the past year.
  • Take Advantage of the limited time 2-week free trial offer now and receive 20% off your introductory subscription pricing. Click here to learn more.

Disclosure: I am/we are long BTC-USD, BCH-USD, LTC-USD, XRP-USD, DASH-USD, ZEC-USD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.