Bitcoins opened the door for thousands of other cryptocurrencies, which paved the way for an even more significant number of investors looking to take advantage of the newly discovered financial market. But, as this market is volatile, it wouldn’t be your best move to put all of your saving on cryptocurrency investment before you read this article. Below you have four common dangers in cryptocurrency investing, which should be your reading before any substantial investment. The future holds many surprises, probably both positive and negative, for cryptocurrencies, and you should not go there without proper knowledge.
Loss or Destruction of the Private Key
If you dug into the world of crypto, by now, you know that coins need to be stored inside of an e-wallet. The one who is able to control them is the person who is in possession of the private and the public key. Bot of these items are unique, and without them, you can’t have an access to a wallet. We can’t stress how important it is to keep hold of your private key. If you misplaced it, lost it, or it’s stolen, there’s no means to check your assets. When this happens, you can say goodbye to what you earned to that point, as it would be irreversibly lost. The worst-case scenario is that someone else gets a hold of it. If this happens, it is this third party who is going to have access to what once was yours, without having to have any consequence of crypto theft. Trust us; even the worst things have happened.
The development of every modern society is followed by the development of the current aiming to take it down. The situation is the same with cryptocurrencies. Once people got a hold of crypto information and started mining BTC first and later trading all types of crypto, people who aimed to take advantage of this appeared out of nowhere. Today we have hackers whose only intention is to take advantage of honest crypto traders, exchanges, and other institutions and individuals involved with cryptocurrencies. By now, you have probably heard of the massive amounts of crypto stolen from various sources, mostly exchanges. Only in 2018, there was 1.7 billion dollars worth in crypto went missing due to hacker activity. This was only one year, and the trend continued, and more hacker attacks are expected in the future. While cryptocurrency is looking to establish itself as a viable option on the financial market, it has significant security issues to take care of before becoming one.
The most famous cryptocurrency is, without a doubt, Bitcoin. It has been present on the market for over a decade, and it’s still going strong. It is also the primary reason why crypto gained all of this popularity. But, not all coins are equally successful. Today, on the market, we have between 1,600 and 2,000 available coins.
This is a vast pool to pick from, and if you are not sticking to the ones already established on the market, you have a tough decision ahead of you. There’s no safe way to know which new coins are going to be worthy of your investment. As we said, BTC is here, and it looks like it’s going to stay, but even with massive coins such as Bitcoin, it all revolves around speculation to date. There’s no way you can tell how much currency is going to be worth after ICO.
But, even with all the fog surrounding this matter, there are plenty of people investing in crypto daily. The number of already established cryptocurrencies is currently standing at 72. Out of these 72, 57 of them have a market cap set at slightly over $100 million. The remaining 15 are worth over $1 billion. Data as this one give security to people if not much else for further investments. This data is public, and you can dig deep into it and find coins worth of your money. But, even if your research is thorough, and all boxes are filled, there’s a chance that the value of the named coin is going to disappear, and you’ll be left with a large zero. The matter of the fact is that there are too many coins flocking to the ground, and the ones that show promise will push out those with less luck.
Taxation of Digital Currencies
At the moment of writing this article, in most countries, there are no tax regulations regarding cryptocurrencies. This could change in the future, and this is what’s keeping traders and investors uneasy. It all comes down to the jurisdictional system of a specific country. Not all of them have the same view on the cryptocurrencies that are more and more becoming financial instruments. Some states and their laws systems view them as assets, while others look at them as they’re fiat currencies. There’s a huge difference, and those who involve themselves in trading and investments would probably like to have a clear picture. It is expected that in the future, there are going to be taxed on selling, buying, receiving, trading, and investing in cryptocurrencies. Once this happens, the landscape is going to change, as there are people who love the situation as it is today and are even taking advantage of it. You can be one of them.
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It is not hard to see investing in cryptocurrencies is not a piece of cake or a walk in the park. Yes, some people got rich on BTC and other cryptos, but there are also risks involved. As you can see, we have singled out some of the most significant risks and dangers investors can face once they get involved with the world of cryptocurrencies. Luckily, for now, the rewards can be high, and people are happy to risk it for the more significant gain. Nonetheless, even if you are a risk-taker, be aware of what we said and read this list again if necessary to better understand the full picture.