8 Cryptocurrency Risks That Are Often Overlooked
Cryptocurrencies are a new and exciting investment opportunity, but they come with risks that are often overlooked. In this blog post, we’ll take a look at eight of the most common cryptocurrency risks.
1. You might lose it all to hackers
As cryptocurrencies have become more popular, they’ve also become an increasingly attractive target for hackers. In early 2018, for example, a South Korean cryptocurrency exchange was breached and hackers made off with a staggering $40 million in tokens.
You might be thinking that this problem won’t affect you because you trade with reputable exchanges, but hackers are constantly finding new ways to steal cryptocurrency. This trend is only expected to continue.
2. Cryptocurrencies aren’t protected by the FDIC
Many people choose cryptocurrencies in order to avoid government regulation. While this is certainly true in some cases, the government isn’t completely absent from cryptocurrency. After all, they still collect taxes on your gains!
What many don’t realize is that cryptocurrencies aren’t insured by the FDIC. This means that if you lose your cryptocurrency to theft or hacking, there’s no way of getting it back.
3. Cryptocurrencies can lose a lot of their value overnight
Although cryptocurrencies are often thought of as revolutionizing the financial sector, this new technology has its own set of flaws. One issue is that cryptocurrencies can lose a lot of their value overnight as the market fluctuates.
This can be a very scary feeling if you’re not expecting it, but it’s an easy problem to avoid. All you have to do is be aware that it can happen and only risk a small percentage of your total investment capital. Don’t go all in.
4. You might accidentally send your cryptocurrency to the wrong wallet
This is another common problem that can be easy to avoid, but it still happens quite frequently. Remember that every wallet has its own unique address, and if you send cryptocurrency to the wrong wallet you can say goodbye to your money.
Fortunately, you can check a wallet’s address by requesting it from the owner or doing a quick Google search. If you take this simple step, you should be able to prevent most of these costly mistakes.
5. You might not understand how cryptocurrency works
The first step to ensuring success with any investment is understanding that investment. If you don’t know what cryptocurrencies are or how they work, you should probably withdraw your investment until you’ve done your research.
This is a huge issue because many people that invest in cryptocurrencies haven’t done the necessary research. They saw their friends profiting, they heard about cryptocurrency on the news, and it looked like easy money. Those who fall into this trap are almost certain to lose money.
6. The blockchain can be slow and expensive
Blockchains are the foundation of all cryptocurrencies and they tend to be slow and expensive by design. While this doesn’t affect the price of most cryptocurrencies, it can have a serious effect if the company making use of the blockchain suffers from high transaction fees and slow download speeds.
If a cryptocurrency has a slow or expensive blockchain, it might be a good idea to steer clear. Although you might make a quick buck, the long-term success of that cryptocurrency is probably limited due to its blockchain.
7. Cryptocurrency might be outlawed where you live
Cryptocurrencies are growing in popularity every single day, but they’re not legal in every country. In fact, China has already outlawed cryptocurrencies and some other countries are looking to follow suit.
8. Wallets aren’t completely secure
Cryptocurrency wallets are great for storing your funds, but they’re not 100% secure. Hackers have successfully breached popular wallets in the past, so it’s important to ensure that your wallet is secure before you place any funds within it. If you want to know more about wallets check out how does trezor wallet work.