Why Investing in Cryptocurrency is Risky?

Cryptocurrency is the digital or virtual currency in this modern age that serves as a means of exchange. Over the years, the cryptocurrency network has spread widely to the extent that its means of exchange purpose is adequately met. Without exaggerating, it is safe to say that a little above half of the world’s populace has an understanding of the strings of benefits they stand to gain. However, not every one of them knows about the risks attached to the Crypto network.

Decentralized Status

Although the decentralized Status in the Cryptocurrency world is one of the advantages that digital currency and investors enjoy, however, this same perk is very risky. The lack of physical presence in the cryptocurrency world equates to the lack of a central authority or institution. This lack of central authority, therefore, leaves room for discrepancies to happen. This means that when any form of complication arises, the investors may be left in a lurch because there is no central authority or government to report the case.

Market Manipulation

Due to a lot of social engineering and misinformation on digital platforms, the Crypto network is affected, and investors manipulated. However, the investors affected most are those with little or no knowledge whatsoever about the risks and changes in the market system.

Hacks

Unlike the physical banks where money and other valuables are stolen at gunpoint, the Cryptocurrency world is safe from this. However, this does not outrightly write off the fact that theft and other illegal acts happen in the Crypto world. It is a digital network that is not free from being hacked. 2018 and 2019 recorded the highest attacks on Cryptocurrency. However, hackers got out with more money ($875.5 million) with only six hacks to the Crypto network. In 2019, they could only get away with $283 million. Hence, the risk of being hacked is a significant security threat to the Cryptocurrency world.

Technology

Over the years, investors, as well as financial institutions, have not been able to curb the effect of technological complications in the Cryptocurrency world. This is because there is much technological advancement which everyone does not understand fully. Therefore, investors must read more about Crypto trading platforms to have a full grasp on different opportunities and platforms available in the world of Cryptocurrency for them to invest.

Poor Liquidity

Liquidity in the Cryptocurrency market allows for stability in the prices of goods and assets. However, the same Crypto market battles with the challenges of Liquidity. When the Crypto market faces the problem, it results in a volatile market which will cause an increase in the prices of assets.

Fraud and Money Laundering

Since there is no central authority to report any fraudulent activity, investors are at a loss when or if they become victims of fraud and Money Laundering. Over the years, people believe that the Cryptocurrency world gives room for fraudulent activities of all sorts. Hence, this is a significant risk for all investors to look out for especially those that do not wish to be victims of such criminal acts.