Investing in cryptocurrencies has been a topic of controversy for a long period among well-known businessmen in the finance sector. Cryptocurrencies are electronic currencies that can be exchanged and traded with the help of the internet and some experience in the field. Along with some advantages, trading these currencies can involve a lot of risk-taking. For instance, their price keeps rising and falling and is a matter of concern for investors.
Electronic money and threat associated
The Internet is the common source of survival for thousands of people in today’s world. From banking details to home addresses all are somehow stored on the internet.
1) Hackers can have easy access to the digital wallet that stores the digital currency of an investor and can rob them without giving any instance to the victim to recover it.
2) To solve this problem special digital ‘keys’ are provided to investors that allow access only to the person responsible with the help of a password.
3) Ever since the rise in fraud cases, cryptocurrencies like Bitcoin have given more emphasis to strengthen their internal securities by upgrading technologies and spreading awareness among investors about the scammers. This has reduced fraudulent cases effectively. Thus, being ‘digital’ in nature does not impose any threats or risks to the investors as of now.
Several factors are associated with digital currencies that cease them from being entirely safe.
- Apart from the risks related to hackers and ill-willed men, losing the digital ‘private key’ is another issue associated with the risk of cryptocurrencies without which accessing them is not possible.
- Also, along with the great experiences and knowledge on the subject one needs the luck to succeed in trading. There’s no guarantee that a particular crypto project will fail or not as competition is increasing among blockchain projects. Beginners find it difficult to trade digital currency in such a scenario bitcoin wallet can offer some help.
- Cryptocurrencies built on cutting-edge technology further increase the risk for investors.
Issues related to volatility
The value of cryptocurrencies is never constant in the crypto market. They may reach peaks or have a major downfall depending on the persisting condition of the market.
1) Cryptocurrencies are well known for their ‘outrageous’ volatility. Volatility has a great impact on the market and has the potential to decide the fate of the investor.
2) Understanding the risk associated with volatility is the primary step to enter the crypto world. Without having the mental strength to accept the concept of loss, investors are advised to not involve themselves in crypto trading.
3) In the crypto market, investors have suffered crucial losses but some have also turned into billionaires due to its volatility. A common strategy applied by experienced investors is crypto holding. In this technique, traders hold their cryptocurrency for a day and then exchange it when the price skyrockets in the market. This strategy not only avoids failure but also has the potential to change the fate of the investor.
4) Profit can never be guaranteed in the crypto market but one can build a well-planned strategy to avoid any kinds of risks.
Adoption of cryptocurrency
Despite the associated risks with cryptocurrencies, the digital market is progressing drastically.
- Upgradation of infrastructure and internal security are permitting more investors to invest in digital currencies.
- With the establishment of the crypto future market, many organisations are gaining direct disclosure to the cryptocurrency sector.
- Investors of Bitcoin firmly believe that Bitcoin has the efficiency to become the first-ever global currency.
- While several other factors have a great impact on the riskiness of cryptocurrency, the greater acceptability of it shows the progressive nature of the sector and the investors.
The blockchain technology associated with cryptocurrencies is readily adopted and implemented in many industries and sectors. Investing in the crypto market can diversify the portfolio of the investor. Lastly, one should only invest that much amount which they are ready to lose.