Dangers of Investing in Cryptocurrency

Beyond all the hype surrounding blockchain tech and cryptocurrencies in general, it is expedient to face the facts once in a while. Investing in cryptocurrencies is not all rainbows and sunshine, there is the possibility that you can lose all your investment. Like everything in life, cryptocurrency has its pros and cons. A lot has already been said and is constantly being told about the advantages (and the possibility of “mooning”), but this does not remove the inherent risk associated with crypto investments. So, what are the possible dangers of investing in cryptocurrencies?

Fraud

There are over 1600 cryptocurrencies in the marketplace, and more are springing up literally every day. There is no arguing the fact that a large percentage of these projects are worthless and mere pumps and dumps. For this reason, ensure you research a project before investing. Also, it is advisable to stick to projects with reasonable market caps (they are less prone to price manipulations).

Once you go past the challenge of which cryptocurrency to invest in, the next question most people ask is how do I store my cryptocurrencies. Because most people will like to benefit from price fluctuations and hold other cryptos order than Bitcoin and Ethereum, online exchanges are arguably the most viable option. But here’s the thing, these exchanges are centralized and may decide to pull a fast one on you. For example, I stumbled upon a post of someone accusing Kucoin of not having a physical office. Kucoin has grown to become one of the favorite exchanges in the crypto space. Now imagine if this claim is valid, and they decide to exit the market. You will definitely lose all your investment with them.

To stay safe, never leave a significant amount of cryptocurrency on any online exchange. While having your cryptos on an exchange offers convenience, if you intend to play big, then get a hardware wallet.

Security

Over $1 billion has been stolen in cryptocurrencies since 2017. A large percentage of this amount was stolen from cryptocurrency exchanges. The likes of Mt. Gox, CoinCheck have been hit in the past, causing them to shut down. Even top crypto exchange, Binance has come under attack by hackers in the past. It may also surprise you to know that over 150,000 devices in the UK have some form of malware aimed at hijacking their crypto accounts. With this in mind, you should be open to the possibility that you wake up on morning and find out that your funds have been stolen from your mobile wallet or your favorite exchange has been hacked.

Here’s my timeless advice to you: “Never invest more than you are willing to lose.”

Cryptocurrencies are Volatile

If you have been following the prices of cryptocurrencies, then you’d agree that investing in cryptos is for the brave. One minute prices are up, and the next, prices are down. Between January and February for example, my crypto portfolio was down by over 50%. I was forced to sell some of my digital assets at a reduced price because I need to cash out. This could happen to anybody and at any time. The crypto market reacts to every news, and you should be ready to take it.

Given the dangers, it is recommended that one think twice before making any investment in cryptocurrencies.

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Posted from my blog with SteemPress : https://www.wallstreethodl.com/dangers-of-investing-in-cryptocurrency/

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