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If you’re thinking about investing in cryptocurrency, you may want to reconsider. Here’s why you shouldn’t put your money into digital currencies.
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The Risks of Investing in Crypto
Cryptocurrencies are digital or virtual tokens that use cryptography for security. They are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.
Volatility
Cryptocurrencies are often lauded for their volatility. While this can be seen as a positive by some, it’s worth noting that this same trait can be viewed as a negative. For example, when the value of Bitcoin surged in 2017, many people attributed this to the buzz around the currency. But when the value of Bitcoin dropped by over 50% in 2018, some of those same people lost a lot of money.
Cryptocurrency prices are also affected by news events. For instance, when there’s news of regulation or cracking down on exchanges in China, the price of Bitcoin has been known to drop. In other words, investing in cryptocurrency is not for the faint of heart.
Lack of Regulation
Cryptocurrencies are not currently regulated by any government or financial institution. This means that there is no protection for investors if the value of a currency drops suddenly or if the exchange is hacked.
Security Risks
Cryptocurrency exchanges are frequent targets of hackers and other malicious actors. In fact, a 2018 report from CipherTrace found that nearly $1 billion worth of cryptocurrency was stolen from exchanges in the first nine months of that year alone.
One high-profile example is the 2014 hack of Mt. Gox, which at the time was the world’s largest Bitcoin exchange. hackers were able to steal 850,000 Bitcoin from Mt. Gox, which totaled more than $450 million at the time. The hack ultimately forced Mt. Gox to file for bankruptcy.
More recently, Japanese cryptocurrency exchange Coincheck was hacked in early 2018, with hackers stealing more than $500 million worth of NEM tokens. And in 2019, Binance, one of the largest cryptocurrency exchanges by trading volume, suffered a serious security breach that resulted in the theft of 7,000 Bitcoin.
These hacks are just a few examples of what can happen when exchanges are targeted by malicious actors. As such, investors should be aware that their cryptocurrency could be at risk if they store it on an exchange.
Why You Shouldn’t Invest in Crypto
Cryptocurrencies are incredibly volatile and their prices can fluctuate wildly in a short period of time. This means that if you invest in crypto, you could end up losing a lot of money very quickly. Crypto is also a very new asset class and there is a lot of uncertainty about its future. For these reasons, you may want to think twice before investing in crypto.
You’re Likely to Lose Money
Cryptocurrencies, also called virtual currencies or digital currencies, are a type of money that exists only electronically. They’re backed by a technology called blockchain, which is a decentralized ledger of all cryptocurrency transactions. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Investing in cryptocurrencies is extremely risky — more so than stocks, bonds or even buying gold. Why? Because there’s no intrinsic value to these digital tokens (unlike stocks, which represent ownership in a company) or commodities such as gold (which have industrial uses). In addition, their prices are highly volatile and could drop suddenly — as we’ve seen recently with Bitcoin, Ethereum and other digital tokens.
Bottom line: If you’re thinking about investing in cryptocurrencies, you should do your homework first and be prepared to lose all your money.
It’s a High-Risk Investment
Cryptocurrency is a high-risk investment. The value of cryptocurrencies can fluctuate wildly, and there is always the possibility that the market could crash. If you’re thinking about investing in crypto, you should be prepared to lose all of your money.
Before you invest in crypto, you should do your research and understand the risks. Cryptocurrency is a new and untested asset class, and you should be prepared for a high degree of risk.
You Could Be Scammed
One of the dangers of investing in cryptocurrency is the potential for scams. Bad actors have been known to create fake coins, pump up the price of a coin by artificial means, and then sell off their holdings before the price crashes back down to earth. This practice is called “pump and dump,” and it’s one reason why some people are hesitant to invest in cryptocurrency.
Alternatives to Investing in Crypto
Cryptocurrency is a digital or virtual asset designed to work as a medium of exchange. Cryptocurrencies are decentralized, which means they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. While crypto can be a profitable investment, it is also risky. If you’re looking to invest your money, there are plenty of alternatives to investing in cryptocurrency.
Invest in More Established Currencies
There are more established currencies available to invest in other than cryptocurrency. These include government-backed currencies, such as the U.S. dollar, as well as widely accepted private currencies, such as the euro or yen.
Government-backed currencies are backed by the full faith and credit of the issuing government, while private currencies are not. Private currencies may be backed by commodities, such as gold or silver, but they are not backed by the issuing government.
Cryptocurrency is not backed by anything other than the faith of those who hold it that it will be worth something in the future.
There are also more established methods of investing in currency than buying cryptocurrency. These include foreign currency exchange traded funds (ETFs), which track a basket of foreign currencies, and currency mutual funds, which invest in a variety of debt and equities denominated in foreign currencies.
Cryptocurrency is a relatively new phenomenon and is still very volatile. If you’re looking to invest in currency, you may be better off investing in more established currencies and methods of investment.
Invest in Gold
Gold is a great alternative to cryptocurrencies. It is a safe investment, and its value has been stable for centuries. Gold is also a tangible asset, so you can hold it in your hand and see it grow in value.
Invest in Stocks
There are many alternatives to investing in crypto, including stocks. When it comes to stocks, there are a few things you need to know. First, stocks are a lot more regulated than crypto. This means that there is more protection for the investor, and the chances of fraud are lower. Second, stocks tend to be more stable than crypto. This means that they hold their value better over time and are less volatile. Finally, stocks offer a higher return potential than crypto. This means that you could make more money by investing in stocks than you could by investing in crypto.
