When dealing with any kind of financial market, there are always risks. Fortunes are made and lost in the global market. It was the same when Bitcoin, the first cryptocurrency came out on the market in 2009 and it wasn’t until the end of 2017 and the beginning of 2018 that it reached its peak, hitting just below $20,000 in price per Bitcoin. It’s no wonder really why people chose to throw their hat into the cryptocurrency ring. But with crypto being still very new on the scene and technology and code ever-evolving, it’s hard to know what risks you face when investing in cryptocurrency.
Fluctuation of the Market
This is the double-edged sword of the cryptocurrency world. Just as you can make hundreds or thousands of dollars in the market, you can lose it just as quickly. The market seems incredibly fickle because it is. Cryptocurrency is at its very core, digitally based, the perceived value of the individual currency causes the actual value to fluctuate.
This volatility centers around mainly how cryptocurrency is discussed online and the global perception of these discussions. Things like security breaches and bad press can cause a downturn in value across the board. The image of the cryptocurrency is nearly as important as the currency’s ability to adapt to the ever-changing market. The fluctuations of the market can be a risk for those investing in cryptocurrency.
Oversaturation of Digital Currency
With the current count of types of cryptocurrencies over the 2000 mark and the ability for it to be created at any time, there’s a definite oversaturation of digital currency on the market. There are the forefront currencies, like Bitcoin and Ethereum, with values through the roof. At the time of writing, Bitcoin is priced at $4,979.32, and Ethereum is at $163.30. While the prices are near galaxies apart, Ethereum is still one of the highest priced cryptocurrency. Many fledgling currencies are valued at less than .10.
As the market becoming oversaturated, currencies are being created for the sake of getting a foot into the door of the market. These new currencies are meant to either fill particular niches that have yet to creep up into the market in any substantial way or they perform little functionality for the same reason. Rather than being able to focus on the heavy hitters in the market, the focus is being spread between a lot of lower valued currency. It may seem like a good idea to invest in the naught a cent assessed currency on the off chance that it’ll skyrocket like Bitcoin in the early days of crypto, but it’s incredibly unlikely as the explosive growth of each individual currency is unsustainable.
Like anything set in the digital sphere, security is a significant risk. Most of the time, we deem it necessary or the risk so negligible that it’s not even a designated risk at all. With our funds, however, it becomes a whole different story. Gaining access to our personal funds or investments can wreak havoc on your financial stability and freedom. You don’t have to look too far for stories of trade markets for cryptocurrencies being hacked. There have even been a few this year, not to bring up some of the worst crypto hacks in histIf there’s a loophole or weakness in the system, someone will find it and exploit it. Worst still is that your money isn’t protected. Many crypto trading markets have promised to pay back what was lost, but that’s not the case with everyone. Your investments are at the mercy of the security put into place, and while the market has been working to keep up, there will be people who are one step ahead.
Despite the abysmal amount of hacks and thefts of cryptocurrency from their owners, the crypto market is still on the rise. People are going to want to invest when the idea of making their fortune off an obscure cryptocurrency skyrocketing out of obscurity is too sweet and tantalizingly close. If you invest, you should do so with the knowledge of what the risks are from the very beginning. You might get lucky, like those who invested in Bitcoin from the beginning, but it’s best to know beforehand what you could be getting into. If you were one of the former, be sure to use GetCryptoTax for all your crypto tax needs.