Digital currencies have been around for a while now. However, the vast majority of people and organizations are still not ready to invest in this type of asset. For example, reports show that less than 5% of Millennials invested in cryptocurrency to date.
Digital coins bring traders a number of practical benefits – they enable instant payments, reduce transaction fees, remove territorial barriers, allow portfolio diversification, and so on. However, it seems like a lot of business professionals are not convinced that cryptocurrency is the right way to go.
The only logical question is: What are the main reasons for suspicion among potential investors? There is not a single answer to this inquiry. Rather, there are six elements that make cryptocurrency dangerous and risky.
Price Volatility
The price volatility is the main reason why investors are afraid of buying cryptocurrency. The market is still very fragile and unstable. In fact, any given coin can experience major ups and downs in less than 24 hours.
This makes the cryptocurrency business extremely risky, particularly for beginner-level traders who do not have enough information about their assets. It is enough to analyze the price of Bitcoin, the most powerful digital currency, and realize how tricky it is to predict new trends in this area.
Bitcoin was worth less than $1,000 in early 2017. Following that, Bitcoin skyrocketed to over $20,000 by the end of the year. However, it took Bitcoin only a few months to drop to $6,000. If this can happen to the most important cryptocurrency, who says it won’t repeat with any other digital coin?
No Regulations
As you probably know already, cryptocurrency is a completely decentralized asset. Therefore, there is no central authority to govern and control the market. However, while this feature attracts many businesses, it chases away many people. This is due to the fact that there are no regulations to follow in any kind of situation or dispute.
Jake Gardner, a member of the US essay writing service who specializes in crypto markets, claims that the lack of official procedures adds a big dose of uncertainty to the whole process:. Gardner stated, “You can lose money because of the changing protocols and you don’t have central authorities to complain to. There are no guarantees whatsoever.”
Security Issues
Just like every other online business, cryptocurrency trading can also be subject to security issues. In fact, studies reveal that 2018 had been a record-breaking year for cryptocurrency market frauds, noting that hackers steal $2.7 million from exchanges every day.
Cryptocurrency exchanges are focused on financial technologies primarily. However, they often neglect cybersecurity along the way. Pair it with the lack of regulations we described above and you’ll learn why so many people are still hesitant about investing in digital money.
Cryptocurrency is Hard to Comprehend
There is another very simple reason why cryptocurrency does not attract as many investors as expected a few years ago. Namely, the entire system and technology behind it are difficult to comprehend and require a fair share of learning and analysis.
The average business professional will be confused in the first step already.
By definition, cryptocurrency represent any form of currency that only exists digitally. Cryptocurrency usually has no central issuing or regulating authority. In contrast, it uses a decentralized system to record transactions and manage the issuance of new units. That process relies on cryptography to prevent counterfeiting and fraudulent transactions.
If it is difficult to explain the concept itself, then it must be even harder to execute business successfully. Indeed, a lot of people are not willing to risk it, so they play it safe by investing in other types of assets.
Slow Scalability
Although the market is growing steadily, cryptocurrency is still nowhere near traditional channels of financial transactions such as Visa or MasterCard. On this subject, Gregory Johnson, an essay writer in charge of financial topics, says this poses the question of scalability. Johnson stated, “The number of users is growing relatively slowly, while the technology itself is unable to process more than a few dozens of payments per second. In such circumstances, it’s hard to see how cryptocurrencies could jeopardize traditional systems and overtake a larger portion of the market share.”
Market Manipulation
The last danger of cryptocurrency trading comes in the form of market manipulation. Only a handful of traders really understand how things work in the cryptocurrency universe. Therefore, they can easily create artificial buzz and boost the popularity of almost any digital coin.
They do it to pump up the price, sell their assets expensively, and earn a small fortune in a matter of hours or days. This is never a good thing for inexperienced players who trust online sources because they waste money just as quickly.
Conclusion
Digital coins can be a promising business opportunity for clever traders. However they can also turn out to be a disastrous investment decision. The entire cryptocurrency market is still surrounded by suspicion and mistrust for a number of practical reasons.
Be sure to invest time in following the cryptocurrency market and act predicatively. Google any new company and invest time in forums and Discord groups surrounding the company. Additionally, be aware that there is no guarantee that you will make money in the market.
