The Risks and Concerns of Investing in Cryptocurrency


Cryptocurrency has been around for over a decade, but many consumers still don’t understand it. It has grabbed the attention of finance and tech industries, but it wasn’t until Bitcoin started to cost $19,783 each that it became a household name. While cryptocurrency has been on the rise, it’s not without its risks and some serious concerns.

Crypto is digital money that exists on a decentralized platform that allows users to make transactions anonymously. Its value is determined by online speculation and its price can be volatile. This makes it risky for investors, but it also gives individuals the opportunity to earn profits by purchasing and selling.

The cryptocurrency market is unregulated, which means there are no consumer protections like those found with traditional financial products like credit cards. This could mean that it’s harder to dispute fraud charges or recover funds if you lose money investing in crypto. Additionally, cryptocurrency exchanges and brokers are vulnerable to cyber attacks that could cause you to lose your investments.

A major concern is that crypto has no intrinsic value, meaning that it’s not tied to any physical assets or resources. This makes it more susceptible to economic policy changes, government regulations, bank failures and other factors that can affect the value of traditional fiat currencies. Additionally, cryptocurrencies are often volatile, meaning that their prices can skyrocket and then plummet in a short period of time.

To avoid losing your money, you should only buy cryptocurrencies from regulated and licensed exchanges or brokers. These will usually require you to verify your identity before allowing you to buy or sell. This will usually involve providing a government-issued ID, a selfie of yourself and sometimes documents like your passport or driver’s license.

It’s also important to spread your investment across a variety of different cryptos, rather than putting all your eggs in one basket. This will help you minimize the impact of a single cryptocurrency’s price fluctuations.

While advanced cryptography practices ensure that your transactions are secure, it’s not uncommon for bad actors to steal from users of cryptocurrency platforms. For example, hackers might gain access to private keys and seed phrases by hacking exchanges or wallets. Additionally, tokens might be lost forever if a wallet is destroyed or forgotten.

Another potential issue is that cryptos have no backup system, so if you lose your private key, you’ll lose your money. For this reason, it’s critical to use a password-protected wallet and keep backups in multiple locations. Finally, you should never pay for goods or services with cryptocurrency unless the company is a legitimate business that you’ve personally researched. And beware of anyone who tries to contact you by text, email or social media asking for payment in cryptos. These are likely scams.