✔️ Information reviewed and updated in December 2023 by Eduardo López
Like any investment, cryptocurrencies also have risks as they are always subject to factors that can cause us to lose money. That is why experts recommend paying close attention to risks before making a decision that could put our money at risk.
Next, we will talk to you about what are the risks involved in trading cryptocurrencies. In this way, you will be able to consider all the sides of the coin and create a plan that allows you to minimize risks and thus maximize results and your profits.
➡Risk 1: An intangible asset
Para muchos, the fact that cryptocurrencies are nothing more than a series of complex and encrypted codes based on Blockchain, which in turn is intangible and only exists in the digital world, is a great risk. And it is that, unlike the gold that we can touch and protect in our hands, with the coins this is not the case.
If one day the internet or electricity disappears around the world, cryptocurrencies would cease to exist, losing their value. In the same way, the project does not materialize or the Blockchain is destroyed, you would say goodbye to your money.
➡Risk 2: Decentralized market
Although one of the great advantages of virtual currencies is the fact that they operate in a decentralized market, they can also be a risk. And the fact that it is decentralized means that nobody controls and regulates it.
This exempts cryptocurrencies from harsh and bureaucratic regulations, but also increases the risk of scams and fraud. It is common to see ghost projects, fraudulent collections, altered white papers and projects that only seek to steal money with cryptocurrencies that will never see the light of day. Furthermore, users do not have the backing of authorities to protect them.
➡Risk 3: Beware of ICOs!
The ICO or initial offering to finance a cryptocurrency is a fundraiser that you launch with the intention of attracting investors. While it is a great opportunity to invest, it can also represent a great risk.
Why? Due to the fact that there are ICOs that are simply a fraud, since they only seek to raise funds and then disappear. This is very common, in addition to the fact that there are also ICOs that do not have a project with future potential so they lose their value quickly.
➡Risk 4: Errors when transferring your cryptocurrencies
If when transferring your cryptocurrencies you put a wrong address in the destination Wallet, say goodbye forever! This because of a wrong transfer is practically impossible to recover which will make your currencies remain floating in the Blockchain.
No matter how many brarts you make, how many tears you shed or how many screams you throw to customer service and technical support, the same Blockchain makes it impossible to recover them. So, you will have to be very attentive and verify the address 10 times so that a message that those virtual currencies never arrived does not take you by surprise.
Risk 5: Volatility of virtual currencies
This is perhaps one of the biggest risks any investor faces, as cryptocurrencies are very volatile. If you thought gasoline in the sun was volatile, cryptocurrencies can be in heaven and then hell on the same day.
This instability means that one day you can be a millionaire and the next, you can lose everything because your investment will never remain in a stable range, at least not like in other assets. That is why many experts recommend having a watchmaker's timing with the upward and downward trends of currencies.
➡Risk 6: Storage
Although storing cryptocurrencies is very simple, because that is what Wallets exist for, there is a great implicit risk in the way in which these currencies are stored. The first is the one we all know, a security vulnerability in the platform.
The second is that, in the absence of regulation, any day a currency platform could say goodbye, close its doors and disappear with all your cryptocurrencies. Thus, as a regulation grows, there will be no one to defend you. That is why many recommend putting your digital currencies in a private Wallet.
➡Risk 7: Hackers
Finally, we have this risk which is implicit in most internet operations including cryptocurrencies. We cannot deny that the presence of increasingly sophisticated hackers is a threat to which we must pay close attention.
Undoubtedly, this danger is latent, since more and more hackers have the ability to violate any security system. Its increasing sophistication makes the current form of protection of cryptocurrency operators practically obsolete which makes the possibility of a hack real.
✨ How to reduce these risks?
Although the risks might seem really scary, in reality, there are ways to fix many of them, in fact, everyone has an alternative to minimize them. Here we will give you 3 tips that will help you reduce the risks when investing in cryptocurrencies:
- Get advice: It is very important to know how the world of cryptocurrencies works and what influences when investing. Consulting experts on indicators, statistics and others will allow you to make better decisions, which is useful when reducing volatility.
- Choose a broker properly: Knowing how to choose a platform for trading cryptocurrencies is very important, as this will reduce potential security risks and hacks. Too it will give you the certainty of knowing that this broker follows the regulations (not written, but that most follow), provides certainty and security.
- Beware of ICOs: Finally, one way to reduce the risk of being a victim of a scam is to know how to identify which ICO is reliable and which is not. This will help you avoid the temptation of an initial offer that may turn out to be a scam.