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Importance of Understanding the Risks in Cryptocurrency

You’re probably one of those people who are seeing everybody else showering in their wealth thanks to the recent but still powerful surge that bitcoin and other forms of cryptocurrency had over the past few years. So you might think you should just go into the whole crypto-card rewards, day trading, and investing fiesta that everyone seems to enjoy. Still, it would help if you didn’t make rash decisions based on your emotions.

So before splurging a majority of your money into cryptocurrency, you’re going to need to be aware of all of the positives – or in our case, the negatives, before you even think about investing. There are quite a few – not to mention that they’re pretty big risks. If you’re wary of these risks, you can always make a plan to stay cautious and end up on top of the market.

Cryptocurrency’s Value Is Very Inherent

What do we mean by inherent? First, the value of cryptocurrency can be very volatile. It rarely ever settles into a healthy number – the difference in numbers is far too great to calculate a reliable average. For example, on the last day of 2020, Bitcoin’s value was way below 30,000 dollars. Fast forward three months later, in March 2021, Bitcoin’s value skyrocketed to 60,000 dollars.

It would be tough to detect any of the changes in the cryptocurrency market since it can be pretty unpredictable. However, one wrong move, even if just by a little, the numbers and values of cryptocurrencies could drop drastically.

Cryptocurrency Isn’t Actual Money

Cryptocurrencies aren’t adopted nor taken in by any government or anything affiliated with the government. They neither have a physical form or any actual value – despite what many investors may say. Although, it’s not long until cryptocurrency is adopted by the current market and can be used for different transactions. 

This is tied to the previous risk, but it’s an entirely different thing. Since people just gave value to the cryptocurrencies, if the people and the market suddenly decide(although unlikely) that cryptocurrencies hold no more value, its value just drops to 0 – no questions asked.

Cryptocurrency is Still Unregulated

Because cryptocurrency is still lacklustre and has too many spots missing and puzzle pieces out of place, it’s very unlikely for the government nor any central banks to take up cryptocurrency as a proper form of payment. This poses a big problem for the policymakers since they aren’t too used to dealing with very volatile assets. Also, since there is no one to regulate and maintain cryptocurrency, there is a chance your account will get breached by malicious hackers. 

Cryptocurrencies Aren’t All That Fool-proof

Since everything is all digital – your wallet, the money, any other vaults you have, the security, and the transactions, there’s no way that you’re not at risk for any skilled hacker just to come in and swoop every single crypto coin that you’ve been collecting for years. This is one of the stronger issues and risks why the government isn’t taking cryptocurrencies – privacy and security are significant factors.

The way transactions work with cryptocurrencies is that there are different nodes where the money can be sent to and from – although it feels random, this doesn’t necessarily mean it doesn’t have a workaround. As long as hackers have access to several nodes, they can just trace back to the source and continue to take from what they can get.

The Security of Your Funds

One of the many concerns people have with cryptocurrency is the security of their funds. Since investors usually use online wallets for their daily trades, they are prone to be targeted by people with bad intentions. Not to worry, this is normal, especially when there is money involved. There are various ways you can do to add more security to your funds, such as choosing a reliable exchange, Bitcoin Era is a good example, or getting an offline wallet, and many more.

Conclusion

Your willingness to collect, invest, and trade cryptocurrencies are all up to you. As long as you’re willing to accept your losses and keep your gains, then feel free. However, don’t forget the risks that come along with the business you’re dealing with. So make sure you always have a plan and backup plans before starting.

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