Digital currency has become a hot topic these past few years, with many raging about its advantages and benefits. However, all investment types come with a particular risk, even those which are less volatile. In this article, we are going to talk about the risks associated with cryptocurrency, so you can determine if it is the right choice for you. Let’s get started!
When it comes to risky investment types, cryptocurrency is high on the list. With one of the most volatile markets, a coin’s price can change in the drop of a hat. This high risk-factor means that you can either build your wealth or lose everything.
As of 2019, over 1000 cryptocurrencies have failed, meaning there is no way to predict what will happen each year. This then leads investors to consider if it is all really worthwhile.
Like most things done over the internet, there is always a risk of cybersecurity threats and fraud. By clicking on the wrong link, you are not only putting your wealth at risk, but also your identity. The web is full of fake websites, disguised to look like exchanges, so it’s essential to do your research. On top of this, you also have to be aware of other common cryptocurrency scams, such as phishing emails and Ponzi schemes.
Currently, bitcoin and other digital currencies are not accepted worldwide. In fact, some places have even put a ban on it, including Bolivia, Morocco, Nepal, Vietnam, and Pakistan. This means that while you may be able to buy bitcoin in Russia, some other parts of the world will not accept it.
As cryptocurrency is solely digital, it relies entirely on technology. This can cause many problems, especially if there are computer malfunctions. On top of this, if an investor forgets their digital key, there is no way to access their funds. While blockchain technology has made significant advancements, for some, nothing can beat cash that they can handle.
Another risk associated with digital currency is that it is still relatively new. When comparing it to other more traditional methods, such as real estate, stock, and bonds, it certainly stands out from the crowd. This causes governments and other investors to be afraid of it, as they don’t understand it’s potential.
While no interference of third parties can be considered an advantage of cryptocurrency, it can also be a risk. Since it does not involve any government authority, there is little protection for consumers if something goes wrong. So, if your funds do manage to get stolen, you will more than likely have to bear the consequences.
And that’s it! These were six risks associated with cryptocurrency investing. While you do have the opportunity to make a significant profit from trading digital currencies, nothing can deny that the market is extremely volatile. Since this is a relatively new technology, we also can’t make predictions about its future.
What do you think? Would you invest in cryptocurrency?