Cryptocurrencies have been around for a while now. They’re quite complex concepts and they take some getting used to, especially when you take into consideration the fact that new forms are launched frequently.
Many people are tempted to start investing in cryptocurrencies before they’ve fathomed how they work. This is a huge mistake from their part. No matter the type of currency, or cryptocurrency in this case, you must have a deep understanding of how proper investing is done.
Since cryptocurrencies are not regulated nor controlled by the government, many people seem to think they are illegal. They are not. They are not physical money either, but digital, so you can’t go to the ATM to exchange them.
Perhaps you should know all these before you actually learn how to invest in cryptocurrency. Having explained a few tricky aspects concerning cryptocurrencies, let’s take a look at the greatest risks you take when investing in them.
When Investing in cryptocurrencies, you can:
1. Be Hacked
Because cryptocurrencies are only in the digital world, you are never 100% secure. It only takes one clever, skilled hacker and you can lose all your money in the blink of an eye. Try to secure your wallet as much as possible.
The platform you are on should also take some safety precautions, just in case. We put this risk on the first place because it’s widespread and truly the biggest danger of investing in cryptocurrencies besides that of doing it without the required expertise.
2. Lose Money
Keep in mind that trading and investing in cryptocurrencies is a young market. Because of this, the volatility of the prices can be extremely high.
If you have no experience in investing, therefore you haven’t quite acquired that sixth sense investors have, your fortune could shrink to half of its size before the market correction occurred.
Not even “professional” cryptocurrency investors are fully capable of predicting a market crash. You just hope for the best, and that’s seldom a good practice when money are involved.
3. Be Ripped Off
Let’s suppose you pay for something with a credit card. Afterwards, you realize you’ve been scammed. All you have to do is call the bank and trace that surplus you’ve paid when you should not have.
In some cases, the bank will return that money to you. This does not happen with cryptocurrency. If you’ve been ripped off during a transaction – particularly a transaction with (BTC) BitCoin – no one will be able to give you any sort of help.
Illegal or erroneous transactions are very hard or downright impossible to track on the inter-web, so you cannot be too careful.
4. End Up Taking Tainted Money
Because cryptocurrencies are not regulated, you can get money from cyber-terrorists without knowing it, particularly if you’re a frequent visitor of the obscure Dark Web.
If, by chance, the government or the authorities manage to track it down and they find it in your wallet, you will have some thorough explaining to do. If you’re a rookie investor, you’ll find it impossible to explain how that money got to you in the first place.
This will lead to that and you could be on the list of the authorities for a long time, which isn’t, needless to say, good for investors.
5. Be A Victim Of A Ponzi Scheme
Due to the high volatility of cryptocurrencies, there is absolutely no chance anyone could offer you certain gains. It’s simply unrealistic. Young investors are not only inexperienced, but greedy, as well.
They jump headfirst into transactions they think are fabulous just to learn a harsh truth: there is no such thing as a “guaranteed gain” in investing cryptocurrencies. Anyone that promises you that is undoubtedly a scammer.
This type of unethical behavior is called a “Ponzi scheme”. Please learn as much as possible about this before you start investing. It will come in handy and preventing you from getting into some trouble you could easily avoid by doing some research.
6. Lose Your Portfolio/Wallet
Cryptocurrencies are demanded by people, they have no value of their own. If people become uninterested in a certain cryptocurrency, that will eventually decrease in value until it’s completely useless.
In this case, you will have to make some lightning-fast exchanges, but these are not possible when you’ve just started learning about investing in cryptocurrencies. Before you know it, you might have 0 funds in your wallet.
This is every investor’s nightmare. One cannot predict the downfall of a cryptocurrency, which makes the prospect of it losing its value even more horrible. This is yet another huge risk you must be willing to put up with when investing in cryptocurrencies.
7. Lose Your Money If A Coin Is Banned
There have been many discussions on whether the Bitcoin should be banned or not. Why? Because it’s used in such a wide array of criminal activities on the Dark Web. In some countries, the Bitcoin is shunned by online communities.
This can happen to any other cryptocurrency you might think of. It if is used too many times in illegal activities, it will eventually get a bad name and authorities will ban it.
Yes, it is not a physical currency, so it does not really have an impact on economy, but it still a danger to people. If the cryptocurrency you’ve invested in is banned, well… you’ll lose all the money you’ve managed to pile up from transactions and trading.
Concluding Remarks
Investing with real money in the real world requires wit, a will to take risks and careful planning. When one’s investing in cryptocurrencies, these requirements are even more compulsory.
Remember that there is a large catalogue of downsides to cryptocurrencies. The lack of liquidity and the high volatility are just a few of them. Do not invest if you have no idea how to do it.
Watch some tutorials or seminars. If possible, try to persons that have been investing long enough to be able to explain how things work to others.