5 Risks You Need To Know About Before Investing in Cryptocurrencies

Are you considering adding cryptocurrency to your traditional portfolio? Here are a few critical risks to examine.

Price volatility & manipulation

Cryptocurrencies have been on a wild ride. Epic booms, busts, wild swings, and scams have amazed and baffled investors who have witnessed unexplainable and unprecedented gains and losses over the last decade.

Lack of regulations

A lack of regulatory frameworks means there is a high degree of uncertainty like price volatility and manipulation. Investors and entrepreneurs are also concerned about the possibility of future restrictions, which may have a significant impact on the value of cryptocurrencies or end up, ultimately banning them altogether.

Market adoption

Market adoption remains low for a host of reasons, from regulatory concerns and technology shortfalls to market volatility, public misunderstandings, and the fact that cryptocurrencies and the underlying blockchain technology that powers them are still emerging and in their infancy. This means there’s a chance that this new asset class, impeded by many different factors, regulations being one of them, will never be broadly adopted, leading to a complete loss of value. There is a clear need for more laws, technology improvements, and institutionalization to help drive trust and scale.

Security, custody & consumer rights

Storing cryptocurrencies and other crypto assets can be risky business. There have been significant incidents of theft on personal wallets but also exchanges. Hacking remains a constant threat if cryptocurrencies are not correctly stored and protected.

Exiting the market

The crypto market’s off-ramps are a real problem for many investors. Many exchanges allow withdrawals in USD only, some also allow EUR, GBP, and JPY, but the choice is minimal, and exchanges frequently require high minimum withdrawals when withdrawing to fiat. Many exchanges that support fiat withdrawals also only accept a few leading cryptocurrencies, and to withdraw fiat money, investors need to go through a tedious verification process that can take months. Some exchanges are accused of withholding funds for unclear reasons, and many banks are still very wary of accepting money from the sale of cryptocurrency. All this exposes investors to exchange rates, fees, and risks associated with dealing with opaque exchanges. The situation is improving, but it’s far from ideal.

Interested in fintech, crypto, ecommerce, cybersecurity and the future of work.