The Risks of Cryptocurrency: The Dangers of Investing In Crypto
To start off, if you want to invest in a cryptocurrency, a huge mistake would be to invest all your entire life saving on the technology, at least for now. Cryptocurrencies today are incredibly volatile, they’re new and still did not adapt in today’s market, I personally think that would change in a decade or even in a few years, but it is still too early to judge on that matter. Investing all your life saving can slaughter you and exponentially reduce your investments. You can quickly lose all your money if you haven’t researched properly and don’t know what you’re doing. After all, it took crypto investors many years to gain their rewards so do not fall for the “get rich quick scheme.“
One of the most critical keys to find success in the crypto market is to research appropriately about the cryptocurrency you are about to invest, and you must possess the ability to identify cryptocurrencies which are backed by solid fundamentals. There is a huge amount of coins available today, and there is a tendency for most to overlook the fundamentals of the cryptocurrency and make investment decisions based on the hype. This is especially common since many do not understand the mechanics of the cryptocurrencies that they are investing in. They tend to just follow the hype. Many do not even what cryptocurrency and blockchain are and how does it work, so start off with that, have a clear understanding of what the technology is, and after that start researching on the many different coins that exist today and make your decision after that.
Even though the whole world is slowly starting to know and understand more about cryptocurrencies day by day. Legal and regulatory issues are two of the big problems facing the crypto sector till’ today.
Because the asset class is still new as mentioned earlier, banks and governments have not yet formed a coherent fiscal policy for the technology. For that reason, there’s always a risk that their trading rules, outright legality, or even taxation status, could change overnight.
Although this point is not proven, many believe that collusion, insider trading, and market manipulation is rife across the cryptocurrency sector.
The reason behind is that coins shoot up by dozens of percentages over the space in a day or few hours, only to dramatically fall back to their previous prices the following day. These incidents are named as “pump and dump” schemes and could take advantage of people’s fear of missing out.
It is not news that a considerable amount of cryptocurrencies are stolen every year, in fact, in 2018, overall an amount of 1,7 billion dollars was stolen, and that is just in a year. One of the most significant problems that cryptocurrency hasn’t been able to shake is the security problem.
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