Investing in cryptocurrencies? You may have heard about the positives and earning possibilities, but do you know how to invest in cryptocurrency, and what are the risks of investing in one? Not all sites and content are willing to show the other side of the coin, but it is important to be aware of the risks of this type of investment.
This article will bring a sincere and realistic analysis of the currency.
Investing in cryptocurrencies
Absence of a centralized command
Currently, there is no authority or institution that regulates investment rules and other important points regarding bitcoin. Bringing it to a simpler context, there is no institution like the Central Bank for digital currencies. In a way, this may seem interesting, since decisions are made collectively. But what if it stops happening?
Disagreements can occur at any time and the absence of a regulatory institution may be lacking. Decision-making ends up being hampered, which can cause currency instability.
Lack of rules and legislation
In Europe, it has not yet proposed any type of regulation for bitcoin investments. Much of this stance is due to a certain informality conveyed by the way in which cryptocurrency investments are conducted, especially under the idea that it is simply creating a bubble of speculation.
This lack of identification of relevance on account of the authorities results in the absence of regulation, which leaves the environment unsafe, with the currency not developing and increases the risks of investing in bitcoin. Although at first glance everything works well, in certain situations it can be risky to have no one regulating this type of activity.
The bitcoin universe has its own characteristics, which include issues such as the number of currencies available for trading on the market, in addition to other important issues. Without a regulatory institution, this currency information and definitions are subject to change at any time.
A recent event serves as a good example of this type of risk. There is a limitation of 21 million currencies in the world. It is precisely this number that causes the supply to be less than the demand, that is, it enables this great appreciation of bitcoin. The point is that it was suggested to increase this number, to better distribute the coins and decrease the concentration of amounts, which caused dissatisfaction for those who have bitcoins.
Possibilities of attacks
Bitcoin is protected by a system that has proven to be efficient, the blockchain. So far, there have never been any successful attacks on the system itself, which would affect millions of investors. But, as we know, hackers are just as skilled as those who develop protection systems. What if one day such an attack was effective?
The point is that without an institution that regulates and controls bitcoin, investors who lose their shares of the cryptocurrency in the event of a hacker attack would be left without support. It is precisely this uncertainty that acts against bitcoin. In addition, there are also digital wallets, which is where coins are stored. These have already suffered attacks, which encourages the use of offline wallets.
Chinese government intervention
China is a country known for its restrictions broad, different from our culture. Among these restrictions is the internet. The country has a powerful firewall, which controls access to various resources on the world wide web. The country’s main relationship with bitcoin today is miners, that is, those responsible for recording currency transactions.
These fundamental elements for the functioning of the currency network are concentrated in much of China, comprising 50% of the bitcoin miners in the world. What if, suddenly, the government of the country decided to intervene in the activities of these people? This is one of the real risks of investing in bitcoins and it could cause disruption, in gigantic proportions, to all currency investors.
The emergence of new currencies
Not everyone knows, but bitcoin is a specific nomenclature for a type of cryptocurrency. Just like in the stock market, a series of other currencies can appear all the time, which happens simply out of nowhere, without any kind of ballast. As they arise, they can disappear. Imagine the situation of investing thousands of reais in bitcoin and it will fall into disuse in a few years?
The new currencies appear frequently, with apparently high potentials, so, like bitcoin, they follow this speculative profile, it does not bring anything new. In addition, other cryptocurrencies can also interfere in value, which makes the risks of investing in bitcoin even greater.
In the technological world, everything is very dynamic and can change from one hour to the next. Bitcoin suffers exactly this reflex with regard to the appreciation of the currency. Volatility is very high, which further exposes the risk of investing high amounts in this type of speculative market. Factors that contribute to this are, in particular, the limited amount of coins and the still limited use.
This issue is not a problem, but a risk. There are several stocks on the market that present these characteristics, with the burden being borne by the investor. However, more secure investment possibilities exist, which is different in cryptocurrencies. Imagine always investing your savings in volatile stocks? It sounds uninteresting, and that’s what happens with bitcoin.
The risks of investing in bitcoin are clear, which means that perhaps this is not yet a valid option. Searching for shares on the stock exchange, according to your investor profile, is the best way to have reliable and interesting earnings.