Just like any other business, you can either incur a loss or profit in the crypto industry. Be that as it may, you can lay out a number of precautions to minimize risks. While the cryptocurrency industry has grown to become a multibillion sector, it has a fair share of risks that you should avoid. Read here to know more.
Ranging from high volatility, Ponzi schemes and lack of regulation, you can easily lose your entire income in seconds. Traditionally people have been using tools like grid trading bots to reduce manual work but it’s not all. There are so many threats to lose your investment. Be that as it may, you require extra caution and learn from experienced investors to reduce chances of losing your investment.
Why Lose Money in Cryptocurrency?
Here are some risks you should be aware of before investing in cryptocurrency.
Fraud
Though Crypto currency is touted as the most secure alternative currency in the World. It hasn’t been spared by fraudsters.
With the high demand for cryptocurrency, fraudsters have taken advantage of the demand to run fake exchanges where people lose their investments. In that case before subscribing to an exchange, you need to scrutinize its authenticity lest you lose your entire investment.
Lack of regulation
Most nations around the World lack a proper framework to handle the crypto market. This exposes investors to risks and an unfair trading environment that is not backed by law.
Though enticing due to lack of taxation, it may be challenging to seek legal redress should anything happen to your investment. However, the fate of the crypto market remains uncertain making it difficult for various nations to roll out policies to control the crypto market ecosystem.
Lack of recognition
While many nations and merchants are gradually accepting bitcoin as a mode of payment, many l entities are still skeptical about the use of cryptocurrency.
So far, only a few stores like overstock, Monoprix, and Newegg among others accept cryptocurrency payment.
On the downside, several companies do not accept crypto payment under the premise that it is not a legitimate mode of payment.
Uncertainty of Cryptocurrencies
Many people around the World are of the opinion that Bitcoin is a Ponzi scheme. The assumption created is that key investors benefit at the expense of those who have no idea about how the crypto market operates.
Additionally, there’s a belief that it will get to a time that those holding cryptocurrency may end up being unable to withdraw. Another aspect is that return on investment is not guaranteed.
Fluctuation in value
The high volatility of cryptocurrencies makes it a high-risk investment. The sudden depreciation and appreciation of value expose your investment to risk. As such, you can easily lose your entire investment in a matter of seconds.
With such uncertainty, its challenging for many investors to determine whether they will make a profit or loss. To evade a loss, you have to keep checking the market conditions. The bottom line, distribute your investment across various assets to avoid risking all your entire investment.
Hacking
Typically, digital currencies are technology-based meaning they are prone to hacking. The worst part is that you may not be able to retrieve or recover your stolen digital currency should you lose your investment to hackers. The most common way crypto investors lose their investment is through exchanges.
Despite using a highly secure wallet, you are likely to lose your digital currencies to hackers on online exchanges. Furthermore, if you lose your wallet key, you may not retrieve your coins. In that case, you need to carry out thorough research to determine whether you have a credible wallet.
Final Thought
Just like any other business, you can either make a profit or a loss. As such, you need to identify your weak areas and understand the prevailing market conditions to ascertain whether it’s time to invest or keep off. Either way the aspects highlighted in this article is ideal in helping you avoid losing your crypto investment.
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