Is trading Bitcoin as easy as it sounds? Certainly not, because even though this digital coin has been around for more than a decade now, it is yet to get mainstream acceptance. Companies have started accepting Bitcoin as payments for their goods and services but a lot needs to be achieved still for it to become a replacement for fiat currencies. The main reason being that Bitcoin or cryptocurrency as a concept is still in a nascent stage and there are quite a few challenges that they need to overcome to reach their goal. Most of the challenges can be resolved but it may be a while before you can actually start paying at the mall with Bitcoins.
Top challenges that Bitcoin trading faces:
- Lack of widespread acceptance: While Bitcoins may be steadily climbing the popularity charts and big retailers may have started to accept Bitcoins as payments, the digital currency is still a long way from becoming accepted worldwide as a medium of payment. Leading payment processing companies need to step in for Bitcoins to gain mainstream adoption.
- Volatility: This is unarguably the biggest challenge in Bitcoin trading because the crypto market is characterized by extreme volatility and unpredictability. The recent price surge with Bitcoin values hovering around $50,000 have only added to the euphoria centering on the Bitcoin. But while this volatility has sparked interest in Bitcoins, it has not helped to make it reliable. It needs to be far more stable before you can actually start depending on it. The automated platforms like Coincierge.de are really into the task of pushing the trading bar high. The automation has become so popular that fresh traders have been giving their suggestions constantly to develop the apps.
- Lack of user-friendliness: One of the main causes of concern with digital currencies like the Bitcoin is that they are still not very easy to use; this is probably why they are yet to get mainstream adoption. To trade Bitcoins, you will first need to create an account on a trustworthy exchange, provide your personal ID verification documents, link the account to your bank or credit card, and then start transacting. However, things are likely to become more streamlined with companies like Square entering the Bitcoin scene. It would help if it was possible to buy Bitcoins with an app like Square Cash.
- Vulnerability: While there are security measures to ensure that Bitcoins cannot be stolen, loopholes remain. For instance, when you store your coins on an exchange and it gets hacked, you stand to lose your funds. Online wallets are also prone to frequent cyber thefts and hacks, making Bitcoin vulnerable.
- Illicit activities: Since Bitcoin transactions were anonymous, people started using it for illegal activities like purchase of illicit weapons and drugs and for money-laundering purposes. This is one challenge that appears to be hard to resolve because Bitcoin transactions will continue to be confidential and private.
- Taxation issues: According to existing laws, the Internal Revenue Service looks at the Bitcoin and other cryptos as “intangible property” making them liable for capital gains taxation. So, if you purchase Bitcoins and sell these for a profit, you need to report this in your tax filing. Now Bitcoin users will need to maintain every record of their Bitcoin transactions; else, they can get into trouble with tax authorities. The other option is they stop using Bitcoins altogether.
- Scalability issue: The blockchain on which Bitcoins was founded limits the data that one block can contain to 1 megabyte. This means only about 3 transactions can happen every second. It also implies that there will be network congestion once Bitcoin purchases multiply. Processing speeds will be slower and transactions fewer.