How Risky is it to Buy Unknown Cryptocurrency?

Cryptocurrencies – this topic is completely unknown to some people. However, those looking for modern ways to multiply their savings have certainly heard of cryptocurrencies. Some are probably thinking about investing in this type of property so it would be good to get a little better acquainted with cryptocurrencies and whether it pays to invest in them.

What are cryptocurrencies?

Source: finance-monthly.com

Let’s start with what cryptocurrencies are. Their full name is cryptocurrency or virtual currency. As in the case of regular currency, we can pay for products and services in digital currency – of course, if the seller accepts this type of payment. All cryptocurrency transactions take place in the virtual world – we cannot withdraw them or turn them into a physical equivalent. Contrary to conventional payment systems, no bank or other senior institution monitors the cryptocurrency market.

The lack of oversight and a completely free market make many potential users of the cryptocurrency exchange wonder if such an investment is safe. Of course, every venture, including investing capital in Bitcoin and other digital currencies, carries a certain risk. However, most of the arguments are for the security of this market. Bitcoin exchange is secure, incl. due to unique codes that protect cryptocurrencies from copying and re-use.

Which currencies are best for investing?

There are currently more than a thousand different cryptocurrencies, although most know of a few such as Bitcoin, Ethereum, Ripple, Litecoin, Neo, and others. Yes, these are the most famous, but that does not diminish the value of unknown and currently less valuable cryptocurrencies because the situation on the market of this digital money is constantly changing. Just remember that the value of Bitcoin was $ 0.003 when it was released and that it was considered a great success when the value equaled the dollar. Today, one bitcoin is worth more than $ 40,000! So, we can freely say that the same can happen with any other cryptocurrency. Despite all this, investors still prefer to stick to bitcoin. Read more at  bitcointradernow.com/login.

Risks of investing in cryptocurrencies

Source: inc.com

In any market, including the crypto world, there is growth, decline, and price cycles. Currently, there is steady growth with smaller and shorter declines or price corrections. A lot of analysts claim that bitcoin is in a state called “a bubble” and that it is only a matter of time before it bursts. When someone decides to invest in a cryptocurrency, it would be wise to allocate and not invest the entire amount in one cryptocurrency and hope that it will grow 1000% in a short period. It is also not advisable to borrow or invest savings, as cryptocurrencies are high-risk investments. Also, these are often high-risk and unregulated activities, so potential investors must be especially aware of the possibilities of invested funds and the possible lack of legal protection.

There are many risks to investing in cryptocurrencies, and these are some of the most common:

1. Identity theft

Investors are very often exposed to various attempts at identity theft via the Internet. Impersonators try to persuade investors to disclose their personal information, especially passwords or private keys typing them on a fake website, a link given on a social network, or via a message. Fake pages and messages from people trying to steal data are very similar to websites and messages from authentic service providers, which often makes them very difficult to distinguish.

2. Insufficient availability of reliable information

Source: fintechfutures.com

In the crypto market, there is no clear legal obligation to inform all participants about information relevant to price formation traded products.

3. Breach of market integrity

A significant number of indications point to the widespread occurrence of manipulations or attempted manipulations in the virtual currency markets, which is especially visible through the so-called pump & dump groups on various messaging services. They often are expressed doubts about the veracity of significant information, the existence of false volumes in trading markets.

4. Security risks of information systems

Source: newsweek.com

Given the nature of crypto assets, the security risks of the information systems on which they are created, on which they are stored, and on which they are traded are ubiquitous. Investors must be well acquainted with the technical side of the information systems they use themselves as well as with the technical and legal security offered to them by service providers.

The latest wave of the rising popularity of cryptocurrencies, and thus the prices of bitcoin and other altcoins, are mostly caused by the growing demand for this form of assets coming from institutional investors. PayPal then became interested in cryptocurrencies, announcing that it would introduce support for paying them. Tesla recently announced that it has already bought $ 1.5 billion worth of bitcoin, and now one of the world’s largest card companies, Mastercard, is involved in the story.

One of the reasons for this decision is the fact that in that house they noticed that in the past year more and more transactions on their payment system were related to the purchase of cryptocurrencies and that their “crypto cards” were launched more and more popular last July.

Final thoughts

Cryptocurrencies are designed as digital money that would allow people to exchange money without intermediaries from banks or other institutions with faster money transfer and lower transaction costs. It is also not possible to copy them arbitrarily produce. They function as an electronic record of certain values stored in electronic wallets on websites that provide such a service. A cryptocurrency is a fully digital currency whose use is based on trust-based on cryptography.

After all of the above and based on the movement of the value of bitcoin, it can be seen that the price is not at all stable and does not represent a safe investment zone, but it is high-risk investment, which can either bring a very high profit or a very large loss and from that aspect not represents a good investment opportunity nor does it have a future as a secure means of preservation values.

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