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Cryptocurrency is a digital asset, created in 2008. The first exchanger that exchanged digital money for dollars was released in 2010. The cost of the exchange was 10,000 bits for 25 dollars.
Digital currency is gaining more and more popularity today. But, many people are afraid to invest in cryptocurrency despite this because of the possible risks.
You will learn the benefits of investing in digital assets, what are the risks of cryptocurrency and how to get around them from our article.
Benefits of cryptocurrencies
You can often hear the question: is cryptocurrency risky or not? Any investment is a risk, but first we want to tell you about the advantages of digital money:
- availability of electronic finance 24/7;
- reliability of protection against break-ins;
- the ability to mine for everyone;
- no currency inflation.
The ability to track all cryptocurrency transactions from anywhere in the world is the main advantage of digital money.
Risks of investing in cryptocurrencies
The risk of investing in cryptocurrencies can vary. We will consider the possible options.
If you lose access to private keys for any reason and a thief gains access to them, then you can get into the financial risks of cryptocurrency and lose everything that is on your digital wallet. So storing your passwords offline is not recommended. Wrong movement of the computer mouse or a hard drive glitch threatens you with the loss of files with secret data.
Unbacked digital currency
Digital currency is not backed by anything unlike any monetary currency. Public money is backed by public assets, while cryptocurrencies are not.
CybersecurityIt is not surprising to hear that hackers can hack certain companies or exchanges nowadays. Cryptocurrency exchanges are not an exception. Hackers were able to break into a Hong Kong cryptocurrency exchange and steal almost 120,000 BTC ($73 million) in 2016. The Bitcoin exchange rate fell by 24% because of this situation. The hackers were able to bypass Bitgo’s security, two-factor authentication, and multi-signature.
Another case was in 2014 on the Cryptsy platform. The company did not bother to inform its users about it.
The latest case of hacking happened on the South Korean exchange Bithumb. About 2 million South Korean wons were withdrawn from the accounts of the exchange. The daily turnover of the exchange is 35 million USD a day.
A famous scam is email. You will be asked to follow the suggested links that will require you to go through verification under various pretexts – enter your login and password from your personal email account or from an Internet wallet. Such links are most often disguised as well-known Internet resources, completely copying their appearance.
Future investors should take into account the fact that virtual money is already taxed in different countries, in Israel, for example.
Constant price change of cryptocurrency
Frequent “jumps” in the value of digital money add only risks from investing in cryptocurrencies. Financial analysts can determine the value of various currencies in the world accurately, but no one can determine the exact price of Bitcoin for tomorrow.
Cryptocurrency value loss
Technology does not stand still and it changes very quickly. Bitcoin is not an exception. Cryptocurrency has a lot of competitors.
Bitcoin may have the risk of investing in cryptocurrencies despite its popularity – losing all of its value.
The more people start mining and try to withdraw their funds, the more the network is loaded. More and more transactions remain somewhere on the network due to high congestion.
How to reduce risks
Digital money is a profitable and interesting profit for those who are willing to take risks. In order not to fall for scammers, follow these simple tips:
- do not give your codes and passwords to anyone;
- do not share your confidential information with anyone;
- do not send cryptocurrency to external addresses;
- check the security of the site that you are visiting through URL feeds.
You need to know more about the opportunities and risks of cryptocurrency to engage in cryptocurrency. The Crypto Crew team will always help and share experience with those who need it.