Bitcoin risk: Between dizzying price swings and the constant threat of total loss

Investors in Bitcoin face brutal volatility, regulatory minefields and the very real danger of losing everything. Why Bitcoin risk is unparalleled and caution is more important than ever.

Anyone looking at the price development of Bitcoin over the past three months is confronted with a reality that borders on the absurd. Since the end of March, Bitcoin has fluctuated between roughly 61,000 and 73,000 US dollars, with multiple corrections of over 10 percent in just a few days. Only in early June did the cryptocurrency slide from about 71,000 to under 65,000 dollars, before jumping almost 6,000 dollars higher within a week. Such brutal swings would leave conventional investors in shock—and that's exactly where the central Bitcoin risk lies: Is this still investing or already pure gambling?

Current news amplifies the sense of danger. On June 14, the US Federal Reserve (Fed) made it clear that interest rate cuts are not expected before autumn, which tends to dampen speculative assets like Bitcoin. The same week, reports of another major wallet hack surfaced—this time, cybercriminals siphoned millions from hot wallets on a leading exchange (source: Cointelegraph, 13.06.2024). The looming threat: At any moment, regulation can hit the market hard. The US Securities and Exchange Commission (SEC) is increasing its scrutiny (Bloomberg, 10.06.2024), and the EU's MiCA regulation is already tightening the reins. That quick sentiment reversal—from euphoria to panic—is ever-present. Just a single warning tweet from a major figure, regulatory headlines or a technical glitch can mean a double-digit percentage loss in minutes.

But what actually is Bitcoin? Officially, it is an open source, decentralised network for direct peer-to-peer payments. There is no central bank, no government guarantee, and above all, no intrinsic value—unlike stocks (company profits) or gold (physical existence). Its price is set solely by supply and demand, driven by speculation, hope and collective hysteria. The very structure of cryptocurrencies, especially Bitcoin, excludes recovery mechanisms: If you lose your private key or fall victim to a phishing attack, your digital assets are gone forever. No bank will help you, no recourse is possible. The danger of a total loss is not a theoretical risk, but a sober reality. Hacks on exchanges and theft of billions occur again and again (Decrypt, 07.06.2024).

The psychological traps are just as dangerous as the technical ones: the FOMO (fear of missing out) pushes even hardened investors into buying at record highs. Panic selling in the blink of an eye, as in the flash crashes of May and June, are the rule, not the exception. This digital rollercoaster ride is the ultimate test of nerves: while government bonds or established currencies hardly move a percent a month, Bitcoin can fall 15 percent overnight or explode upwards—without any fundamental reason. Risk appetite becomes a synonym for recklessness. Do not let asset influencers lure you; they often profit when you lose.

What should you do? The clear answer: Anyone who needs security, wants to preserve their savings, or simply does not want to gamble, should stay far away. Bitcoin remains a high-risk, largely unregulated speculation product with the very real danger of a total loss. Regulation, cybercrime and raw volatility make it unsuitable for anyone who can't mentally or financially cope with losing everything. Only with real 'play money'—and a willingness to lose it all—should anyone even think about trading or investing.