The very concept of a virtual currency seems to be very attractive considering the growing pace of trade in Internet. A lot of experts think that having the virtual currency recognized by a whole world community may substantially boost the volume of trade operations.
Apparently, Bitcoin is the most promising candidate for such role. However, there are many questions that need to be answered clearly as well as many obstacles that should be overcome. Bitcoin gained a huge popularity among population all over the world and even official state institutions in some countries want to admit it a legal tender. Still, investments in cryptocurrencies involve a set of peculiar risks that should be carefully considered.
Fast growing new markets always bring to life new and unpredicted problems.
Below we will outline eight crucial cryptocurrency risks and the possible ways to prevent them.
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1. Deception during Exchange
There are hundreds of cryptocurrency exchange platforms in Internet, so it is not a problem to buy or sell digital money. However, not every platform has a good reputation. The exchange platforms often look legitimate and even receive a feedback from the customers advertising benefits the exchange provides. In reality, they are filled with bots who vote for fraudsters. There are already thousands of people who joined similar exchanges and lost their funds.
You have to spend some time to find an honest exchange platform in Internet. To mitigate cryptocurrency risks, carefully examine the very website, find the comments of clients about it, read the user agreement and pay attention to the exchange rate.
Follow the link https://ucrypt.io and pay a visit to our platform. We work hard every day to strengthen our reputation of the honest exchange, so you can be completely sure in the security of your transactions. In particular, we offer very attractive LTC / USDT exchange rates with a minimal commission.
2. Strong Fluctuations on the Market
Like rates of any currency, the Bitcoin price changes all the time. If you wanted to purchase one Bitcoin on November 6, 2018, you should have paid $6,461. Think it’s a very high price? Well, on December 17, 2017 the price established a record of $20,000. To make you feel the dramatism of the situation, we must note that already on December 24, 2017 the price sharply fell to $14,626. Such fluctuations are a peculiarity of the Bitcoin market. Investing in volatile markets, you can never be completely sure you receive any return on your investments. If you invest large sums, one day you may incur heavy losses. To avoid this, constantly monitor the market and invest small amounts of money. This strategy will definitely be more profitable in the long run.
3. Cyber attacks
Technology is the basis of all cryptocurrencies. Although the technological solutions underlying cryptocurrency are very complicated, they are still at the risk of cyber attacks. Hacking is one of the most relevant risks concerning cryptocurrency markets. There is literally no way to have the stolen Bitcoins back. Safety technologies for cryptocurrencies must be substantially improved. Presently, even a smart wallet doesn’t guarantee a full protection. To prevent the losses, study your cryptocurrency wallets carefully and make sure you use the most suitable options.
Fraud is another painful problem for the Bitcoin market. Sharp fluctuations of price prompt many charlatans to make use of unsuspecting online traders and earn decent money when the price is high. Fake crypto exchanges are not rare in Internet. They represent a source of substantial cryptocurrency risks for all crypto enthusiasts. Of course, there are some solutions that deal with this problem but they all have certain drawbacks and security of digital assets remains a major challenge.
5. Lack of Regulation
At the moment, the Bitcoin market is a self-regulating one. Since the industry is very new, the governments of practically all countries worldwide have not yet elaborated a clear position regarding cryptocurrency. Moreover, the taxation rules do not apply to the cryptocurrency market, that’s why it is so attractive in terms of investing. In case Bitcoin creates a serious competition to a single state currency, the taxation gap may become a problem. So far, the governments are skeptical about the future of cryptocurrencies but we live in a changing world. No one is able to predict precisely the conditions on the Bitcoin market in, say, 5 years.
6. Limited Use
Despite its growing popularity and high value, Bitcoin still remains a currency with very limited possibilities of use. To be honest, such online stores as Monoprix, Newegg, Overstock and airline companies like Air Lituanica, AirBaltic and CheapAir.com do accept Bitcoins. However, cryptocurrency is far from being recognized as a legal tender by the majority of companies in the world.
7. Dependence on Technology
The very idea of the decentralized virtual currency is supported by many. But in the way it is now, Bitcoin is too dependent on technology. In fact, if we eliminate this technology, we can actually destroy the cryptocurrency. Any conventional currency has a collateral that backs it up. If you own real estate, stocks of gold or government bonds, you can exchange them any time. But the same can’t be said about cryptocurrency. As we have already mentioned above, the technology underlying Bitcoin is subject to cyber attacks and online fraud. Even in case the system simply shuts down, the digital assets are lost forever.
8. Currency vs Investment
There is no clear attitude to Bitcoin. Some people consider it a progressive currency for online exchanges, while others regard it as an opportunity for investments. Elderly people even think Bitcoin will work as a kind of retirement plan for them. In fact, investors risk to lose everything when the pressure of such problems as lack of regulation, market volatility and abscense of collateral becomes unbearable. That’s why do not invest all your funds in cryptocurrency, no matter what price records it beats.