Risk of investment cryptocurrency: What do you need to know

In recent years, the cryptocurrency world has exploded and attracted millions of investors around the world. With great return and diversification in new markets, it is no wonder that many people jump into a cryptographic wave. However, as with any investment, there is a risk. In this article, we will go into the main risk of investment related to cryptocurrency investment and provide a detailed understanding of how to navigate these potential traps.

1. Market volatility

The cryptocurrency market is historically known for its extreme volatility. Prices can shoot in a few days or fall overnight, leaving investors worthless assets. This is due to the decentralized nature of cryptocurrencies, which means that there is no central government that controls prices. The value of cryptocurrencies is widely determined by market demand and speculation.

Example:

2017 The price of Bitcoin was released from $ 1,000 to more than $ 19,000 in a few weeks. Similarly until 2020 Ethereum has risen from about $ 100 to $ 4,500 per month.

2. The disadvantage of regulating

Cryptocurrency markets are not widely regulated, which can prevent investors’ protection for themselves and their property. There is currently no central government that oversees cryptocurrency transactions or regulates this sector.

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3. Safety risk

Cryptocurrency exchange, wallets and other lines platforms are vulnerable to burglars and safety violations. This can lead to theft of your personal keys, which is a critical part of any cryptocurrency investment.

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4. Manipulation of the market

The cryptocurrency market was troubled by the market manipulation and bombs and eviction schemes. This can be caused by artificially inflated prices and subsequent collapse when the market learns about the price manipulated.

Example: 2018 Several important cryptocurrency exchanges were found to be involved in pumps and eviction schemes that artificially ignited the price of certain cryptocurrencies.

5. Lack of Dividend Payments

Many cryptocurrencies do not cause dividends or interest in their involvement. This means that investors may lose passive income and can be high in return over time.

Example: Bitcoin does not pay dividends to its holders; Instead, he uses his mining power to protect the network and confirm operations.

6. Advanceness of regulation

The uncertainty of regulation can lead to a high risk of cryptocurrency investors. Governments are still discovering how to regulate cryptocurrencies, which can lead to confusion and uncertainty among investors.

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7. Technical Risk

Cryptocurrency techniques can be complex and unpredictable. This means that even experienced investors can find difficulties in trying to browse the market.

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How to mitigate investment risk

While there is a characteristic risks associated with investment in cryptocurrencies, there are steps you can take to soften them:

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