Understanding the Risks of Investing in Cryptocurrencies
Digital Currencies (Cryptocurrencies) have emerged as one of the best alternatives to traditional investments, offering better returns in less time. Most experts believe that crypto investments are completely safe as long as you follow the standard rules of investing and do not invest more than what you can afford to lose (same as any other investment).
That said, there are some obvious risks associated with cryptocurrency investments. It helps to know about the risks of investing in cryptocurrencies beforehand in order to make decisions carefully and properly.
So, are you ready to invest in cryptocurrencies? Let’s find out.
What are the risks of investing in the crypto market?
If you are planning to invest in cryptocurrencies or want to know about the risks before you start your crypto journey, here you go.
One of the major issues with cryptocurrencies is the high volatility, which means their value can change (go up or down) at any time. The high volatility of cryptocurrencies also makes it difficult to make any accurate predictions about their price fluctuations.
However, there are some cryptocurrencies, called stable coins, that maintain relatively low volatility in their price. For instance, Titan Coin is a cryptocurrency that mitigates volatility by providing users with multiple applications/platforms to use the currency.
If history is any indication, crypto exchanges are highly prone to hacking and cyberattacks. So, you may lose your bitcoins and cryptocurrencies in a blink if the exchange you’re using ever gets hacked.
The solution is to send your cryptocurrencies to a private, preferably paper wallet, and store there for added security.
As the popularity of cryptocurrencies is rising, so is the number of cryptocurrencies/projects in this space. Out of these projects, many turn out to be fake or fraud and run away after taking the investor money.
For example, ICO, which was once the preferred method for crypto investment, is now widely regarded as spam because of the increasing fraudulent projects.
So, if you invest in a new cryptocurrency, make sure to carefully research and ask around about the project and the team.
Lack of Regulation
Cryptocurrencies are backed by a decentralized blockchain system, which means they are not governed or regulated by any centralized authority like a bank or the government. While that’s a good thing, it can sometimes create problems.
For instance, bitcoin is unregulated by any government, so its value is only determined by its users and holders. The lack of regulation also makes it difficult for anyone to freely use the coin for commercial purposes.
No Global Uses
One of the main reasons why Bitcoin ( and most other cryptos) have failed to make it big is because of their limited uses. Even though the coin is very popular in the digital space, it hardly has many uses in the real world.
However, many new cryptocurrencies are coming with their own use cases. For example, the titan coin comes with a series of apps where you can use the coin for in-app payments.
If you are just starting in the crypto world, you may be worried about many things. But, believe me, crypto investments are not riskier than stocks or other market-based investment. In fact, they are more secure since the human involvement is minimal and so are the fees levied by exchanges.
Hope you start your journey confidently into the amazing world of cryptocurrencies.
Originally Published On vingle.net