Like many things in life, crypto is a double-edged sword. It would be remiss not to delve into some of the cons and potential risks of investing in cryptocurrency.

Interestingly enough, most of the cons of investing in crypto are also what makes crypto so attractive to investors. It just depends on who you are, your investing goals and what type of trading you are into.

Here are some of the risks and aspects of crypto that might be deterrents if you are not prepared to deal with them:

Volatility

We’ve all heard it before: Crypto is risky and extremely volatile. This is undoubtedly true; but it is also this volatility that attracts so many people.

Where there is a real potential for loss, there is the same potential for profits. Volatility can good or bad, depending on what you’ve invested in and your investment strategy. Remember: The higher the risk, the higher the reward. Doing your research before investing in a project is the best way to ensure you come out on top.

You are your own bank

While many people are eager to gain true ownership of their assets and some level of financial independence from banks, crypto also comes with the responsibility of managing and storing your assets yourself.

While keeping your funds on a secure exchange is effortless and works for some, to have true control & ownership of your assets, you will need to learn about private keys and keeping a personal hardware wallet. This can be a little daunting for some.

At Digital Surge, we offer all our traders a complimentary personal wallet that is highly secure and manages the complexity for you.

Crypto is new & rapidly evolving

This is a new world moving at breakneck pace. While exciting and appealing for many, this also means that nothing is certain. Things can change, and yes, go badly, especially if you’ve invested in some more speculative coins.  

Companies and projects aren’t as well established as in traditional investing, and there isn’t much history to base future predictions on. In reality, no-one knows where crypto is going to go, and the market is not made for people who can’t handle a bit of risk, uncertainty and turbulence.

Some aspects of crypto are complex & hard to understand

Crypto is not rocket science, especially if you’re just a casual investor. Still, it is a relatively new space and there are many things that can seem confusing and daunting if you’re just starting out.

While getting a basic grasp on cryptocurrency and the Blockchain is a good place to start, there is a lot to learn if you want to be a serious trader. From fundamental and technical analysis of a project to the different types of wallets and interest earning opportunities, the inner workings of crypto aren’t easy for everyone to wrap their head around.

Scams, hacks & fraud are common in crypto

Trading crypto has never been safer, but there are still plenty of common scams crypto traders must watch out for.

In all new industries there are scammers who prey on naïve investors who are not tech-savvy and have not had experience with impostor websites, pump & dump schemes and email/fake giveaway scams. Luckily, staying safe while trading crypto is pretty straightforward if you: 

• Choose a trusted & secure exchange to trade with
• Get savvy on the most common scams to look out for
• Take some basic online safety precautions
• Don’t believe anything that seems too good be to be true

Learn more about how to stay safe while trading crypto with Crypto Simple!

Not a stable or tried-and-tested store of value

Even Bitcoin, the most established and reliable crypto to date, is highly volatile. While ‘stablecoins’ have been introduced to offer a non-volatile place to store your assets, cryptocurrency, in general, is not the safest place to store your money, especially if you might need to withdraw it in the near future.

Note: This is not due to the technology of crypto itself, but rather to the lack of time crypto has had to prove itself.

While crypto has been incredibly useful as a store of value for countries like Venezuela who have faced hyperinflation and extreme economic instability, cryptocurrencies have simply not been around long enough to be a safe place for the average person from a developed nation to store the bulk of their savings.

Still, crypto-believers who understand the tech have plenty of money locked up in crypto. It all depends on what you’re comfortable with.

Unregulated and unbacked

Cryptocurrencies do not exist physically and some are not backed by gold, banks or a federal reserve (though there are several reasons why these cryptos still carry legitimate value). Some cryptos have proven their utility to the world but they still aren’t as stable as fiat currency or gold, mainly because they have not had the time to prove themselves.

Additionally, regulation is struggling to keep up with the pace of crypto’s evolution and the next few years will likely see governmental regulations have an impact on the value and role of crypto in society.