Even the most hardcore cryptocurrency enthusiast can’t deny the fact that it’s a volatile, highly unpredictable and esoteric market. Trading in cryptocurrency is a risky affair but, at the same time, the highly incremental ROI has made it an irresistible prospect.
While higher risks often bring better profit margins, blind risks can potentially lead to disastrous consequences. That’s why traders willing to purchase them should invest only what they can afford to lose. Read on to know more about the major risks associated with cryptocurrency investment.
- The Value and Longevity of Coins is Speculative
The speculative nature of altcoin value is one of the biggest risks associated with the crypto market. Theoretically, the value of coins rises with the increase in user numbers. But it is impossible to tell which project will attract greater number of users in the near or distant future. Currently there are hundreds of different cryptocurrencies. In another decade or so, many of them probably won’t be existing anymore. From ground zero, it’s hard to predict which altcoin will have long-term, mainstream potential.
- Scam Projects are a Common Occurrence
Like any other digital asset, even the cryptocurrency market is prone to scam projects. Many people have lost their fortunes by indulging in business with companies that turned kaput after a promising beginning. So it’s important to do your due diligence and invest in a genuine ICO.
- Looming Security Threats
Altcoins are susceptible to cyber threats and hacking attempts. The absence of any central regulatory authority makes it vulnerable to malicious activities. The private keys must be protected using strong passwords. Usage of crypto wallets can provide an added layer of security and prevent accidental sensitive data exposure.
- Beware of Blind Temptation
Heard about a new ICO that’s promising a great return on investment? Yes, it can be a tempting prospect, but are you sure the people behind the scene are credible enough to be trusted? Don’t get lured by unreasonable claims. Do your research right, read the whitepapers in detail, figure out the future roadmap and then only think about investing in any new venture.
Just like every other form of asset investment, cryptocurrency and ICO investments are subject to various risks. While the amount of volatility associated with altcoins can be a dampener for some investors, the others might hope to leverage the volatility in their own favor. Ultimately it’s better to be prepared for losses when the stakes are too high.