Is Cryptocurrency Investment Risky?

Cryptocurrencies have changed the world of investing, making it possible for more people than ever to make investments by themselves. Cryptocurrencies have not only revolutionized the possibilities for investments, but it has transformed the marketplace. There are lots of stories out there about people making a huge amount of money, very quickly, just from investing in the right cryptocurrencies. While it is true that people have made vast sums of money from investing in cryptocurrencies, this is not guaranteed. Learning more about the risks that are involved with cryptocurrency investing will help you to ensure you are able to spot the warning signs and stay protected. 

1. The Lack of Regulations 

The lack of regulations in the cryptocurrency world is what can make it one of the most valuable investment opportunities out there. Still, it also increases the possible risks from crypto investments. While cryptocurrencies are currently unregulated by both governments and central banks, this will not always continue to be the case. Authorities across the world are taking steps toward introducing regulations in the cryptocurrency market. For example, Switzerland is one of the first countries that is building a regulatory framework for cryptocurrencies. 

2. Volatility and Manipulation

Cryptocurrencies are some of the most exciting investments you could make at the moment, and part of this is due to the high volatility of the market. There are three major causes of volatility in the cryptocurrency market: sentiment, speculation, and market manipulation. Many different manipulation strategies are being used in the cryptocurrency market, for example, wash trading, dark pool trading, shilling pump, and dumps. 

While many of the strategies used to create the high volatility in the cryptocurrency market are a common form of manipulation in market trading, some are more unique to the cryptocurrency market. For example, tactics such as buy and sell walls created by “whales” who are owners of large blocks of cryptocurrencies have had a huge impact. If you are worried about the volatility of a cryptocurrency before investing, it is useful to take some time to research its history. For example, you can look at Ethereum price history at OKX to see how protected it is against standard market volatility.  

3. Security

Another consideration worth bearing in mind when trying to understand the level of risk involved in investing in cryptocurrencies is the security of the transitions. There have been some news-breaking stories in the past that involved the hacking and theft of cryptocurrency assets. Not only are cryptocurrencies targeted, but there is little protection for investors, and the nature of the market means to recover their assets after they have been lost or stolen. This means that cryptocurrency investors do not have safeguards or insurance to protect them, unlike traditional banks or brokerages. However, there are currently measures being put in place to make cryptocurrency investors safer as cryptocurrency brokerages are paying more attention to the security and safety of their users, which is making the concept of investing in cryptocurrency more appealing to many people.