Digital finance has accelerated in the 2020s due to the pandemic of Covid 19. The governments of states are more appreciating the citizens who trade online. On the other hand, the sudden increment of values of digital currencies has gained more attraction towards its space. Even, the top leveled businesses have got together with digital currencies allowing the customers to make their transactions online. However, investing in cryptocurrencies such as bitcoin is associated with certain profit and risk factors. These are the top 5 risks of Cryptocurrency Investing in 2021.
1. The high Volatility
Cryptocurrency is considered a highly volatile digital currency. It has large fluctuations in the price. For an instant, at end of 2017, the price of a bitcoin was about $20,000. But few days after it reduced up to $14,626. On 13th April 2021, it was about $63,588, but on 25th April 2021, it was stated as $49,059.50. The unpredictable market of bitcoin might be a risk to your financial condition. Constantly being aware of the fluctuations might prevent you from the risk.
2. Cyber Attacks
Cryptocurrencies are completely based on technology. These are not tangible as physical currencies and they are virtual. In the virtual and computer existence, they are exposed to hacking. It is considered as one of the serious risks associated with cryptocurrency. Once if the coins are hacked, there is no method of retrieving them. On the other hand, if you lose or misplace the private key of your Crypto wallet, you will be losing your assets. By giving enough attention to your private keys and selecting a suitable wallet is the best method of avoiding the risk.
Fraud on crypto networks is another highly considered risk. Apart from hacking, there are fake exchanges and orders on crypto-networks. Since the networks are getting wider, there should be a promising technology to avoid these issues of lack of security.
4. Having less or no regulations
Nowadays the governments are interested in creating specified rules and regulations for cryptocurrency. There are some regions that have created a stance on cryptocurrency. The lack of acceptance creates a risky situation on digital currencies. Hopefully, there will be more attention on cryptocurrency in the future.
5. Fresh technology
The cryptocurrencies are yet so fresh to the globe. Even the first-born cryptocurrency bitcoin is just about 10-12 years. In these recent years, crypto-network has faced many changes in concepts, scripts, and forks. However, in the future, there can be occurrences of more changes in these networks. There might be completely new currencies. The future of cryptocurrency for another 10 years is actually not predicted in the present. Perhaps, it can be more useful in the future than today.
- The discussion above is not financial advices, investment advices, or taxing. It is a basic study on the risks of cryptocurrency investing which is done based on resourcing sources.