Is cryptocurrency worth investing in? 5 inherent risks in trading cryptocurrencies

Nov 24,2022
Is cryptocurrency worth investing in? 5 inherent risks in trading cryptocurrencies

Cryptocurrency is a very hot topic. Many investors have conducted various researches and experiments on cryptocurrency, and are still developing rapidly. BTC is one of the most popular cryptocurrencies in the market, as well as other cryptocurrencies such as Ethereum and Lite Coin. So some investors ask, is cryptocurrency worth investing in? Is there any risk in trading cryptocurrencies? So, let's take a look.

Is cryptocurrency worth investing in?

1. Poor security of cryptocurrency

Is cryptocurrency worth investing in? Cryptographic investment lacks intermediate issuers due to its instability and financing of terrorist and other illegal activities, so it involves high risks, which means that no legal formal entity can provide guarantee in the event of bankruptcy. Ordinary people invest in cryptocurrencies, but most of them will lose their money once they encounter bankruptcy. This investment product is obviously not suitable for novices.

2. Many countries do not accept cryptocurrencies

In addition to poor security, cryptocurrencies are still not accepted in some countries and online websites. Only a few countries/regions have legalized the use of cryptocurrencies. Cryptocurrency is also not under control, resulting in a lot of insecurity. For example, China does not recognize the legitimacy of cryptocurrency, and it is illegal to engage in cryptocurrency investment in the mainland.

3. Cryptocurrency is not suitable for everyone

Is cryptocurrency worth investing in? In fact, considering its extremely high risk characteristics, it is not recommended for everyone to choose. If you really want to pursue a relatively rich profit in the short term, why not consider the spot gold with much lower risk than cryptocurrency. As the spot gold is a global financial product, has a long history of investment, and is strictly subject to the supervision of local governments, the qualification security is the first to be trusted. Secondly, although the market fluctuation of spot gold is not small, we can use the Datian Global Price Limiting Platform to set up stop loss maintenance, so that our loss scope is always under control.

Is cryptocurrency worth investing in? How about investing in it now? In fact, it is obvious that the fluctuation of cryptocurrency is too violent, which is not suitable for all investors. The trend of collapse in recent years is enough to prove that cryptocurrency is not a commodity worthy of long-term investment. It can be seen from this that if you want to gain rich profits in a more stable environment, it is recommended to invest in spot gold with more advantages. Novice can first use 0.01 tradable mini accounts to try out light positions in the early stage.

5 inherent risks in trading cryptocurrencies

Point 1: Encryption activities are highly uncertain

The new characteristics of cryptocurrency are affected by a high degree of uncertainty. Speculators looking for profits from short-term or long-term investment in virtual currency have formed a large number of trading activities on the service platform. Cryptocurrency is not subject to the application of central banks, countries or international organizations, property or other credits, and its value is strictly determined by the value given to it by market participants according to transactions, which means that loss of confidence may lead to the collapse of trading activities and a sudden decrease in value.

Second point: There is a risk of online fraud

Because cryptocurrency is essentially a cash loan, it has attracted a large number of criminals who can infect personal computers by breaking into cryptocurrency exchanges, consuming cryptocurrency wallets and using malicious programs to steal cryptocurrency. Because the transaction is carried out on the network, hackers can target people, service processing and storage areas based on deception or phishing attacks, malicious programs, etc., thus causing losses to investors. Therefore, investors must rely on their own computer security system and the energy of the security system provided by a third party to protect the selected cryptocurrency from theft.

Cryptocurrency is highly dependent on unregulated enterprises, including some enterprises that may lack appropriate internal control and may be more vulnerable to fraud and theft than regulated financial enterprises. But the software must be updated regularly, which can sometimes be suspicious. Purchasing blockchain applications from suppliers may result in significant third-party risk exposure.

Third point: operational risk

Relying on the centralized clearing house to ensure the effectiveness of the transaction, we can write off the currency loan transaction in a harmonious way. Cryptocurrency does not have this capability. This kind of lack of water permeability further proves that, because BTC accounts are encrypted, if the "key" of the account is lost or stolen, and then deleted from the owner, it is almost certain that the fund browsing contained in the account cannot be recovered.

If the key of the customer's wallet is stolen, the thief can completely impersonate the original owner of the account, and has the same access restrictions to the funds in the wallet as the original owner, so there is little chance to find it. So once BTC is transferred from the account and the transaction has been submitted to the blockchain, the money will be lost to the original owner forever.

Point 4: Regulatory compliance risk

Some countries may block the use of the currency, or may declare that the transaction violates anti money laundering regulations, despite its global impact. Because of the complexity and decentralized nature of Bitcoin and its large number of participants - senders, receivers (possibly money launderers), resolvers (mining and trading platforms), and currency exchanges, a single AML approach will not exist.

Point 5: Market risk

The market risk is special because the loan currency is only traded on demand. The limited amount of currency means that it may be affected by the liquidity problem, and the limited ownership may make it easy to be controlled by the market. Because speculative demand is promoted and influenced by national policies and public opinion, and its acceptance is limited and there is a lack of alternatives, cryptocurrency seems to be more volatile than other physical currencies.

Therefore, there are significant risks inherent to business composition.

Speaking of this, I believe that you have a certain understanding of the value of cryptocurrencies is not worth investing, and what risks are involved in trading cryptocurrencies. In general, investing in cryptocurrencies can make you rich, but you may lose all your money. Like most investments, encryption assets are accompanied by a lot of risks, but also have huge potential benefits. Xiaobian also reminds investors that they must be careful if they want to enter the cryptocurrency market.