Don’t put all your eggs in one basket: Why you should avoid cryptocurrency
New York City: We’ve all heard about the meteoric rise in the value of cryptocurrencies like Bitcoin and Ethereum, but what many investors fail to realize is that they are at risk of huge losses if they don’t pay attention to the security of their investment. Cryptocurrencies are susceptible to technical errors, hacks, and outright scams due to their decentralized nature. This can lead to investors losing their hard-earned money, so it’s important that you know what you’re getting into before you put your money down on cryptocurrency.
Here are five reasons why you should avoid cryptocurrency altogether (for now).
The biggest risks of being involved with cryptocurrencies
Cryptocurrencies are a relatively new form of currency. They are not backed by any government or organization, and their value is based purely on supply and demand. There are many risks that come with these currencies, including the following:
1) You can lose money. The trade values of cryptocurrencies can change drastically, which means you could lose a lot of money if the value drops before you sell it.
2) You may not be able to cash out the amount of your original purchase because there are limits on how much you can withdraw at a time.
3) Thieves may steal your private key information and use it to get access to your cryptocurrencies without needing your permission or knowledge.
4) Another risk is market manipulation. While prices for most crypto currencies have generally risen over the past year, this trend might not last forever and prices could go down again at any moment.
5) Companies who deal in crypto currencies may fail due to fraud or bankruptcy. If this happens, customers would have no way of getting back their investments.
6) It’s possible that governments will outlaw some forms of crypto currencies so they cannot be used as easily as they are now. Governments might also decide to make rules about where people can spend them or what types of businesses accept them as payment for goods and services
Lack of regulation
There are plenty of reasons why you may want to steer clear from crypto currency. For starters, there are no regulations on the market, which means that any transaction can be reversed and there is always a possibility for fraud. Cryptocurrency also lacks consumer protections because it is not backed by any government or central bank. As a result, if something goes wrong with a transaction such as delayed or lost funds, or an error in pricing, it can be challenging to resolve these issues. And finally, there is a lack of security when dealing with crypto currency due to the rise of hackers who often target online accounts and steal personal information including passwords and credit card numbers. For example, Japan’s Coincheck exchange was recently hacked resulting in the loss of over $500 million worth of virtual coins.
As cryptocurrencies skyrocket in popularity, so do the risks. Cryptocurrency exchanges are prime targets for hacking and theft. A cyber-attack on a popular exchange this week resulted in the loss of $850 million worth of cryptocurrency. Additionally, it is difficult to trace transactions through the blockchain which could lead to fraud or tax evasion. Another issue is that as more cryptocurrencies enter the market, mining new coins becomes increasingly more complicated with diminishing returns. These diminishing returns will be problematic if some currencies become worthless over time (more about that later). You can always mine less profitable coins for fun but it won’t make any significant difference if cryptocurrency crashes. Mining aside, the risk of losing everything with an irreplaceable coin doesn’t seem worth it when there are plenty of alternatives (like stocks).
Money laundering concern
Finance is a field riddled with scams and nefarious activities. Cryptocurrency, which is still relatively new and unregulated, opens up an entirely new landscape of potential pitfalls. The best way to protect yourself is to steer clear of these scam artists and criminals. Protect yourself from the very beginning by avoiding crypto currency altogether. It’s time to take control of your money back.