What are the risks of cryptocurrency?

What Are The Risks Of Cryptocurrency - 5 Important Risks You Should Know | Daily Finance Facts

‍Do you want to know what are the risks of cryptocurrency before you make a decision to buy or hold virtual currencies? If you are reading this, then you probably understand that there are risks associated with investing in cryptocurrencies. Unfortunately, most people who want to know about the risks of investing in virtual currencies end up looking for information online. There are many warning signs that should alert a person not to invest in Bitcoin or any other cryptocurrency.

Let’s take a look at some of the major risks of cryptocurrency associated with investing in virtual currencies.

1. Cryptocurrency Market is in Its Wildest Stage yet

As we know, the cryptocurrency market has seen a tremendous growth over the last year. While the number of cryptocurrencies has grown from 1 in 2016 to 7 in 2017, the amount of money invested in them has increased by a factor of 3,000. This means that the popularity and demand for cryptocurrencies has grown at a much faster rate than the number of investors who are willing to risk their money on them.

Cryptocurrency Market-What Are The Risks Of Cryptocurrency - 5 Important Risks You Should Know | Daily Finance Facts

This has led to a spectacular increase in the amount of scams and fraud in the crypto trading industry. To take a look at some of the most popular cryptocurrencies, we can take a look at the top 10 coins by market cap. This would give us a clear indication of the market sentiment towards these coins and whether or not people are actually buying them or trading them on cryptocurrency exchanges.

2. Cryptocurrency Stocks Are More risky than Bitcoin

If you want to buy a stock, you go to a stock brokerage. If you want to buy a cryptocurrency, you go to an exchange. While both of these involve a bit of risk, when you buy a stock, you are generally taking a chance that the price will go up. When you buy a cryptocurrency, you are taking a chance that the market will support the coin and it will grow in value. There are a number of risks of cryptocurrency associated with investing in cryptocurrencies. The following are some of the biggest risks you might face when investing in cryptocurrencies.

Stocks Are More risky than Bitcoin-Cryptocurrency Market-What Are The Risks Of Cryptocurrency - 5 Important Risks You Should Know | Daily Finance Facts

3. The Potential of Cryptocurrency Collapse is Real

Cryptocurrencies are not government issued money. There are no central authorities that regulate cryptocurrencies like there are with government issued money. This makes cryptocurrencies very risky to invest in. If the market crashes, you will likely lose all your investment.

4. There are already Scams and Fraud Involving Cryptocurrencies

There have been a number of cryptocurrency scams and fraudulent activity involving cryptocurrencies. The most high-profile of these involved a fraudster who called himself “Crypto Jimmy” and promised to buy up large amounts of Bitcoin and then deliver it in cash to people’s accounts. He then disappeared with everyone’s money.

5. You can’t store your Cryptocurrency, so the safest option is to not invest at all

You might have heard that you cannot store cryptocurrencies like Bitcoin or Ethereum because they are “cryptoassets.” However, this is very wrong. Storing your cryptocurrency is not only okay, it is encouraged. In fact, you should be able to store your cryptocurrency at home or a safe location like a wallet or a purse. This can help you avoid buying a too- pricey hardware wallet like the Trezor or Ledger Nano.

Invest cryptocurrency-Stocks Are More risky than Bitcoin-Cryptocurrency Market-What Are The Risks Of Cryptocurrency - 5 Important Risks You Should Know | Daily Finance Facts

The Bottom Line

Investing in cryptocurrencies can be risky. There are many risks of cryptocurrency associated with it, but the biggest one is the potential for the market to crash. The market is volatile and has been known to go through periods of rapid growth and then rapid decline. When investing in cryptocurrencies, it is best to stay out of it for a period of time before making any significant investment. That being said, if you are prepared to take some risks, then there is definitely potential for growth and positive change in the cryptocurrency space.

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