So, you have heard or come across cryptocurrencies (or crypto) and you are now starting to wonder if it is the next evolution of our payment systems or if is it just another get-rich money scheme.
Well, while there may be a lot of controversy around how cryptocurrency is being perceived by both supporters and detractors of crypto as a technology, there are some risks and certain cautionary characteristics associated with cryptocurrency investments. While they themselves are not reasons to write off crypto as a whole, it is important to have a holistic understanding of what cryptocurrency investments can mean for you and your hard-earned cash.
In this article, we will be discussing some of the risks associated with cryptocurrency investments and crypto in general.
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With that, let’s start talking about some of the risks associated with cryptocurrency investments.
Cryptocurrency is volatile and up-and-down
Perhaps the most talked about the risk associated with cryptocurrencies is that their value is volatile in nature. This means that each price or valuation of a particular cryptocurrency may be up 200% one day, and suddenly down another.
While this is a valid concern pointed out by many, it is the opportunity of providing a novel payment or money system that crypto brings which makes it so appealing despite its volatility.
One could argue that as cryptocurrencies mature, we will be able to handle this crypto volatility that is so often talked about.
Crypto investments can still be subject to digital error
While cryptocurrencies are super secure and safe, there is still that risk of it running into an error of being hacked or suddenly not working just because it is living on the internet and on the digital network that is the blockchain.
This is a risk that is understandable since it is a completely digital form of money. However, most forms of money right now have digital counterparts so this risk is not so much one that is exclusive to crypto but is applicable to other forms of payments as well.
Crypto investments may be a cause for super high electricity usage and can thus be a possible environmental concern
Another risk associated with cryptocurrency investments is their supposed negative effect on the environment. Because crypto needs a vast number of machines to maintain its structure and to verify all the transactions that happen within it, it will inevitably need a huge amount of electricity just to power everything.
Therefore, there are valid concerns regarding how this much energy and electricity consumption can negatively affect our environment. However, many supporters have brought up that there have been many crypto mines that make use of more sustainable ways of generating electricity so that such environmental concerns will not be a problem.
There is still a lot we do not know about how cryptocurrency investments will turn out
Last but not the least, there is the risk of just generally not knowing what the future exactly holds for crypto investments and cryptocurrencies in general. With crypto still being such a young way of doing money and making transactions, there is still a lot we do not know about how everything will pan out with the technology that’s touted as the next evolution of money.
However, one can take this uncertainty of course, and look at it from a lens of exciting opportunity. While there may be many unknowns with how cryptocurrency and crypto investments will pan out, there exists the same possibility for its success as well.
In other words, the risks associated with crypto investments may well be worth it in the end. Right now though, we do not know for sure. However, it is still worth a try to see where cryptocurrencies can take our vastly more digital society.
With that, we have now finished talking about some of the risks associated with cryptocurrency investments. We hope that our article helped you understand crypto and all the perceived risks it brings.