Cryptocurrency has become one of the most discussed topics in the financial world.
More and more people are investing in it and want to understand it better to avoid losses.
Bitcoin (BTC) and other cryptocurrencies are volatile which mean that their value can fluctuate at any time.
The extreme volatility of cryptocurrency is one of the biggest hurdles in the way of its mass adoption.
But are you aware of some other risks of cryptocurrency and how can they impact your investment?
Let us find out the challenges you can face when investing in crypto and how you can make your investment safe.
What is Cryptocurrency?
Launched in 2009, cryptocurrency has become extremely popular worldwide.
Bitcoin has become the largest cryptocurrency by market capitalization in the past few years, thanks to its positive adoption and profitability.
In addition, there are over 10,000 cryptocurrencies available from which you can choose the cryptocurrencies of your choice to buy.
Cryptocurrencies are digital currencies or virtual currencies that you can use for online payments and investments.
These currencies exist on blockchain technology which is protected by cryptography.
Cryptocurrency works in a decentralized manner and is free from the interference of a third party in your wealth.
Neither a bank nor any government can intervene in cryptocurrency which makes the owner its sole manager.
Carl Runefelt, alias, The Moon, is a global crypto leader, who is pushing for the mass adoption of cryptocurrency.
He says, “Bitcoin is genuinely game-changing, and it represents a massive transformation for the global economy and, indeed, the whole globe. It represents a paradigm change.”
Challenges with Cryptocurrency
Where cryptocurrency offers multiple benefits, there are certain disadvantages of it that you should be careful about.
Cryptocurrencies are volatile which means that their value can fluctuate at any time.
Listed below are some of the disadvantages of cryptocurrency.
Lack of Understanding
One of the biggest mistakes that crypto investors make when investing in cryptocurrency is a lack of its understanding.
Cryptocurrency is relatively a new type of currency as compared to fiat or traditional currency.
The concept of cryptocurrency is new that is sometimes difficult for people to understand.
Extreme Volatility
While the value of cryptocurrency can spike to amazing highs, it can also crash to frightening lows just as quickly.
Cryptocurrency is volatile and your wealth can fluctuate within minutes.
For example, BTC was traded around the U.S. $60,000 in 2021 and now it has fallen to the U.S. $19,879 (as of September 2022).
Loss of Wallet
Cryptocurrencies exist and are stored online in a crypto wallet.
Once you purchase cryptocurrency, you can store it either in an online wallet or an offline wallet.
These wallets are protected by keys which are complex numbers.
A huge disadvantage of cryptocurrency is that if you lose the key to your wallet, there is no way to restore it.
No Regulations
The crypto market is not regulated which allows sentiments to play a significant role in investments.
Sometimes crypto investors create hype around a cryptocurrency to increase its value for a certain period.
This attracts others to buy that particular cryptocurrency, but once the time is over, it can even become worthless.
Tips for Safe Investment in Cryptocurrency
Even though crypto investments are challenging, you can minimize the risk by investing wisely.
Carl on his YouTube channel, The Moon, says, “Bitcoin is a game of patience. You cannot look at the daily chart and put too much significance on it. Holding long term will make you money in Bitcoin and crypto in general. If you look at the day-to-day or minute-to-minute, it can look very volatile; you see 50 jumps and then 60 dumps. People get fearful and panic, but always remember if you zoom out on the Bitcoin, you will always see a bull trend on Bitcoin.”
Here are some tips that you can follow.
- Invest in cryptocurrency after building its comprehensive understanding.
- Prefer investing in cryptocurrency that you can easily afford to lose.
- Carry out rigorous market research to understand the changing market trends before buying any cryptocurrency.
- Read the recent trade charts of a cryptocurrency in which you want to put money.
- Never share the key to your crypto wallet with anyone.
- Cryptocurrency is a game of patience, and you should avoid looking for short-term benefits when buying it.
Conclusion
Cryptocurrency has shown the potential of changing the financial world once and forever.
Today, successful crypto investors plan their investments wisely according to market facts.
You can also avoid the challenges of cryptocurrency by following the above-mentioned useful tips.