Despite the increasing value and popularity of cryptocurrencies across the world, many investors hesitate to invest their money in digital coins. But still, there are many investors across the world that is eager to try their luck in this profitable market of cryptocurrencies. The crypto exchanges across the world are making sure that people are highly attracted to cryptocurrencies and are investing in the crypto space at a faster rate. In terms of customer base growth, the crypto experts are so optimistic that cryptocurrencies like bitcoin are emerging asset class as it keeps on attracting traders and investors. However, the crypto investments made in specific countries are only a small fraction of traditional investments like equities.
Bitcoin is trending, and the younger investors are crazily investing in crypto assets instead of investing in traditional asset classes, but still, some individuals are hesitant to invest in cryptocurrencies because of multiple negative factors that the network has. Most investors think in digital currencies, there is a huge risk of scams and frauds, whereas some think that cryptocurrencies are highly secure. Now the bitcoin investment craze is increasing day by day so visit here and get all the secrets of investing in it.
Now the main question arises that are cryptocurrencies safe to invest in?
The only answer to this question is that cryptocurrencies like bitcoin are still developing and emerging asset class and are relatively new and haven’t gained widespread recognition like mutual funds, equities, and commodities. Investing in bitcoin is safe because it is based on blockchain technology and uses the proof-of-work consensus method and cryptography that protects the entire network of bitcoin. Also, bitcoin is a decentralized currency which means it doesn’t have any interference from banks or other central authorities. It is a digital currency that isn’t backed by any central authority.
However, but for pure investment purposes, there are many risks that are associated with cryptocurrencies like Bitcoin and Ethereum. These cryptocurrencies are literally no different from traditional assets, but the only difference is that these cryptocurrencies are highly volatile. Even crypto analysts say that crypto investments are risky because of the wild swings in the price of virtual coins. But these swings are likely to reduce after coins get mainstream acceptance. But before you invest your funds in the crypto space, you must be ready to accept that there are risks but rewards too. Also, investors must have a gigantic risk appetite to earn profits from trading bitcoin or other cryptocurrencies. Simultaneously, investors should always keep in mind that cryptocurrencies are more flexible than they appear.
What are the possible risks that can appear and cannot be ignored?
There’s the possibility of a ban and restrictions
In almost all parts of the world, the main risk that is involved with trading cryptocurrencies is due to a lack of oversight and regulation. The reason that government hasn’t come up with a solid stand on cryptocurrencies is because of a lack of regulations. Specifically, if we talk about India, the Reserve Bank of India announced that they are going to impose a ban on the trade of cryptocurrencies. In 2018, the Reserve Bank of India announced and warned holders, traders, and users of digital currencies that there are many risks related to virtual currencies. Even the central bank recommended all entities not regulate digital currencies.
But again, in 2020, RBI clarified that banks can now start dealing in cryptocurrencies. But there are few other risks as well, and one is that there is a possibility of the ban of cryptocurrencies. Also, the government has alleviated its stance, but it is still not clear about a complete ban on cryptocurrencies. In case if the government bans or puts regulations on cryptocurrencies, investors across the world can face heavy losses. However, crypto experts are familiar with digital currencies. They positively feel that the crypto trade is definitely the best option instead of investing in any other investment asset in the financial world.
There is a lack of regulations, and this lack discourages investors from trading cryptocurrencies. Despite lack of regulation, there are many more risks that are associated with cryptocurrencies face that include permanent loss when the password is lost or forgotten, exposure to hacking, and malware attacks and scams.