From User risk to Market Manipulation, 10 reasons why you should avoid investing in cryptocurrencies
Investing in cryptocurrencies? It’s a lot of glitter, but is the outlook for cryptocurrencies really so golden? Many financial experts say that they won’t recommend cryptocurrencies to their customers because of the lack of characteristics common to other investments or asset classes including traditional currency or cash, as well as their volatility, security, the potential for future regulation, and other factors. This article features 10 reasons why you should avoid investing in cryptocurrencies in 2023.
Here are the 10 reasons not to invest in cryptocurrencies:
User risk: Unlike traditional finance, there is no way to reverse or cancel a cryptocurrency transaction after it has already been sent. By some estimates, about a fifth of all bitcoins are now inaccessible due to lost passwords or incorrect sending addresses. It is one of the reasons why you should avoid investing in cryptocurrencies in 2023.
Regulatory risks: The regulatory status of some cryptocurrencies is still unclear, with many governments seeking to regulate them as securities, currencies, or both. A sudden regulatory crackdown could make it difficult to sell cryptocurrencies, or cause a market-wide price drop. It is one of the 10 Reasons Not to Invest in Cryptocurrencies.
Counterparty risks: Many investors and merchants rely on exchanges or other custodians to store their cryptocurrency. Theft or loss by one of these third parties could result in the loss of one’s entire investment. It is one of the reasons why you should avoid investing in cryptocurrencies in 2023.
Management risks: Due to the lack of coherent regulations, there are few protections against deceptive or unethical management practices. Many investors have lost large sums to management teams that failed to deliver a product. It is one of the 10 Reasons Not to Invest in Cryptocurrencies.
Programming risks: Many investment and lending platforms use automated smart contracts to control the movement of user deposits. An investor using one of these platforms assumes the risk that a bug or exploit in these programs could cause them to lose their investment.
Market Manipulation: Market manipulation remains a substantial problem in the cryptocurrency space, and some exchanges have been accused of manipulating prices or trading against their customers. It is one of the reasons why you should avoid investing in cryptocurrencies in 2023.
Unregulated: Cryptocurrencies are not regulated by any authority or regulatory organization. Other investments such as mutual funds, etc are regulated by authority organizations or banks. If we make transactions from bank accounts or use a credit card, we can reach out to banks in case of any discrepancies. The same is not applicable to bitcoin transactions. It can lead investors in a vulnerable situation in case of defaults. It is one of the 10 Reasons Not to Invest in Cryptocurrencies.
No security: Most investors want to pool their capital in safe and secure investments. The major problem with bitcoin is its uncertainty about the future. There is always a risk of extreme volatility, cyber attacks in digital transactions, and several others. It is one of the reasons why you should avoid investing in cryptocurrencies in 2023.
Prone to illegal activities: As cryptocurrency transactions are not regulated by the government and also there is no trail to entail data about the transactions i.e. users at both ends of transactions remain anonymous in case of bitcoin transactions. This feature of bitcoin is prone to terrorist usage and illegal activities. Many cases have occurred where the hackers have demanded bitcoins from the users. Even after meeting their demands, most of the users found their data lost in this attack.
Comparison with Ponzi schemes: Due to the operational issues and the dubious nature of this cryptocurrency, many advisors have compared it with the Ponzi schemes. The rationale behind this comparison is the lack of clarity regarding bitcoin trading. It is one of the reasons why you should avoid investing in cryptocurrencies in 2023.
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