Cryptocurrency Investment Risks

Technology have really advanced since the last decades till now.

These advancements have also brought fought some more risks, alongside the benefits it was intended to bring to individuals and some other businesses.

Cryptocurrency is one of the technology that has come to replace traditional currencies just like some other digital cryptocurrencies, but it also brought its own set of risks in the scene.

Before you start debating it with me already, just know that, because there’s a new currency out there it does not mean it’s infallible.

Although it’s designed to be more secure through encryption, there are still risks of using cryptocurrency.

1. Value fluctuation

Using cryptocurrency such as Bitcoin to purchase goods and services comes with certain amount of risk. And since its inception, it has gone from zero to nearly $20,000 for a single Bitcoin in December 2017.

However, the value currently places it at more than $6K per Bitcoin. This is even a marked decrease from the high it experienced in the recent days.

However, this extreme changes in price will always happen. But the problem is that these wild changes in value increase the risks of using cryptocurrency.

If you’re using it to purchase something expensive, what if the price drops before you close the deal?

You may have to fork over more cryptocurrency than you were expecting. Furthermore, if values rally and rise later it could leave you with buyer’s remorse and huge losses.

2. Global acceptance

Businesses fear accepting cryptocurrency as mode of payment, due to the high volatile changes in the valuation. This makes them reluctant to accept it as a form of payment.

If you try to pay for your online purchases strictly with cryptocurrency, you could end up paying very high amount with some of the businesses.

Additionally, cryptocurrency is not classified in the U.S. as legal tender. This fact alone causes some people and businesses to fear it, mistrust it, and not accept it.

It appears that some foreign countries also have a lack of acceptance. Not all of them recognize digital currency as a form of payment either.

3. Stuck transaction

It’s unfortunate that as humans we do make mistakes. We transpose numbers, record them wrong, and make other errors that are sometimes caught – and sometimes not.

What if an exchange is taking place and the wrong wallet address is entered? You could lose thousands if not tens of thousands or more.

Clearly, protecting your cryptocurrency is extremely important. Fortunately, there are ways you can reduce the likelihood of some errors.

4. Hacking and theft

Even with encryption to protect cryptocurrency transactions there have been hacks resulting in substantial losses. This is another of the risks of using cryptocurrency.

Passwords can be stolen or hacked. Hardware can be corrupted or taken. Others you do business with could be lax in their security.

This could result in losses to your cryptocurrency during a transaction. There are a number of ways thieves can gain access to your digital currency.

Clearly, as a new form of currency, it still has some kinks to work through. However, it is possible to minimize some of the risks of using cryptocurrency if proper precautions are taken.

Concluding on crypto risks

Cryptocurrencies are an emerging market and the future of the regular crypto investment will definitely unfold in many different ways.

It remains to be seen how this market will evolve and whether cryptocurrencies will become mainstream or be relegated to certain niches.

If traditional financial institutions join this burgeoning market, they should apply sound risk management practices with respect to financial, technological, and emerging market risk.