In almost all the cryptocurrency investment articles on the internet, a fairy tale ending of the story is quite common. However, that is only one side of the story. Things can go south very quickly when it comes to cryptocurrencies.
There are several factors to consider before you go on to invest in cryptocurrencies for the very first time. Here are the top ten cryptocurrency investment risks that you would need to keep an eye out for.
Cryptocurrency investing risks:
1- Volatility: Everyone on the internet brags about how they made millions of dollars by investing in cryptocurrencies. However, none of them speak about the volatility of this market. Cryptocurrency market is currently the only market that experiences double-digit percent changes in its value on a daily basis.
While this condition is what the day trader’s prey on, it is not very inviting to a new crypto investor. The volatility is not always towards the upside either. Sometimes, the price does experience a multi-day decrease in its value.
For example, the price of Bitcoin reached $20,000 in the December of 2017. Ever since then this price has decreased rapidly and has lost 70% of its highest value.
Before you start investing in cryptocurrencies, you must know that it is not always sunshine and rainbows. The market does have many dark days as well. Understand the art of crypto trading risks management so that you can tackle the volatility.
2- Regulations: Cryptocurrencies were introduced to replace the centralized fiat currencies. As a result of this, none of the centralized organizations support this virtual form of currency. Consequently, this has led to several regulatory issues, with some countries such as Bangladesh even banning cryptocurrencies. Always be aware of and updated with all the new crypto regulations that are set for your country and abide by them.
3- Long-term investment: There are over a thousand cryptocurrencies out there, with more being added every single day. Before you invest in any cryptocurrency, make sure that you do your own research on that particular asset.
Sometimes, you might find a project very innovative and useful like Digital Ticks Exchange – First Commodity Crypto Exchange. However, this does not mean that everyone else thinks the same. There have been several instances where new cryptocurrencies have faltered because very few people found it useful. Thus, in order to have a secure crypto investment, invest in cryptocurrencies which has a reliable and good track record of management.
4- User protection: Cryptocurrencies are completely detached from any centralized organizations. This has a negative impact when it comes to consumer protection. It means that, if you end up losing your funds, then there is no way of getting them back.
In order to avoid this, people use cryptocurrency disaster management techniques such as using a hardware wallet to store their cryptocurrencies in a more secure manner.
5- Market manipulation: In centralized stock exchanges, market manipulation is a crime. As cryptocurrencies are a decentralized market, market manipulation is a very common thing. Users with a large amount of cryptocurrency or users who have a great influence often tend to use their powers for their benefit and profit at the expense of others.
6- Selling cryptocurrencies: Most exchanges don’t support fiat withdrawals. The few exchanges that do support this, allow withdrawals in USD only. This is not very convenient for people where there is a restriction from the government.
7- Cryptocurrency scams: With the rise in interest towards cryptocurrencies, many people are using them to scam people. Various websites that promise the doubling of cryptocurrencies pop up from time to time in order to scam people. Several ICO’s are designed to simply steal the funds of investors.
8- Human error: This has been one of the greatest threats to new investors. Placing orders on exchanges might seem very intimidating for new cryptocurrency investors. Placing the wrong order might eventually cause you to lose all your funds. Additionally, errors while entering receiver’s wallet address have also resulted in many losing their funds.
9- Cryptocurrency exchange hacks: There is no such thing as a safe cryptocurrency exchange . Any exchange that runs on a centralized server can be hacked. This is the reason why all exchanges encourage people to store cryptocurrencies on a hardware wallet.
However, DigitalTicks is setting new standards in securing your cryptocurrencies through their new age safe cryptocurrencyexchange. They have multiple security layers providing maximum security for your assets.
10- Loss of wallet: A cryptocurrency wallet consists of a public as well as a private address. If you lose your private address, you cannot use your funds anywhere. There have been several instances where people have lost all their funds as they lost the private address of their wallets. One of the most famous incidents was a man who lost his wallet file containing 1,000 Bitcoins when his hard drive got corrupted. (give the reference link)
As per the sources: https://cointelegraph.com/news/infamous-discarded-hard-drive-holding-7500-bitcoins-would-be-worth-80-million-today
Cryptocurrency does not come without any risks. Even though it has so many disadvantages, the advantages that it offers outweighs all of them. Now that you know the risks involved in cryptocurrency investment, invest wisely and always take all these risks into consideration before moving forward.