A Research On Risks Of The Bitcoin Market

Due to the soaring price, Bitcoin is known to the world. Some investors are going to invest it. But they seldom understand Bitcoin, neither the risks of investing it. In past years, the previous investors have suffered heavy losses when price of Bitcoin dropped suddenly. Meanwhile, the investment environment is not standardized.This article aims to reveal the risks of Bitcoin market. Firstly, explain the relevant principles and background of Bitcoin. Secondly, describe the status of market. Thirdly, analyze the volatility of price, the causes and VaR, then analyze other relevant risks in detail. Finally, raise some ways to deal with various risks of Bitcoin for every participants.We find that price risk is the most important risk of Bitcoin market. The volatility of price has clustering and asymmetric, but short duration. The price risk is huge but can bring high returns. The volatility of price reduces when US dollar appreciates or the stock of Bitcoin increases, expands when market news appear or the price of gold increases. In addition, policy risk, liquidity risk, security risk, credit risk and moral risk are main risks that investors face. These risks interact, conduction each other. That is a risk system of Bitcoin market.Regulators, trading platforms and investors should take measures to deal with these risks. They can improve the regulatory system, improve service and management, establish early warning mechanisms and so on to create a safe, healthy and sustainable Bitcoin investment environment.