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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FAQs
Crypto value fluctuates, but not in the same way as traditional investments. No, they waver from extreme highs and very low lows. While this can yield significant gains, it can also lead to devastating loss. This is not their only volatility either.
Is crypto safe to invest in 2023? ›
The rising attraction of cryptocurrency worldwide has similarly impacted Indians as well. According to Nasscom, cryptocurrency investors have witnessed a significant 1,100% growth between 2022 and 2023.
Why should we not buy cryptocurrency? ›
Holdings in online “wallets” are not insured by the government like U.S. bank deposits are. A cryptocurrency's value can change constantly and dramatically. An investment that may be worth thousands of dollars today could be worth only hundreds tomorrow.
What crypto to avoid? ›
Top Cryptos to avoid
| Name of the Coin | Why It Should Be Avoided |
|---|
| Hex (HEX) | Questionable claims of returns, lacks clear utility or revenue generation, making it a risky investment. |
| Shiba Inu (SHIB) | Lacks differentiation and a competitive edge, with failed catalysts and a history of payment coins crashing after rapid gains. |
4 more rowsApr 10, 2024
Cryptocurrency investing carries a substantial risk and should be approached with caution. This still-nascent market is prone to high volatility and uncertainty. However, crypto assets also present unique potential for those willing to accept the elevated risks.
Is digital currency good or bad? ›
Some of the advantages of digital currencies are that they enable seamless transfer of value and can make transaction costs cheaper. Some of the disadvantages of digital currencies are that they can volatile to trade and are susceptible to hacks.
How much will $100 Bitcoin be worth in 10 years? ›
A $100 investment in Bitcoin could purchase 0.00607 BTC today based on a price of $16,466.14 at the time of writing. If Bitcoin hits the $1 million price target by Wood in 2030, the $100 investment would turn into $6,070. This represents a gain of 5,970% from now until 2030.
What are the pros and cons of cryptocurrency? ›
Cryptocurrency in India offers financial inclusion, protection against inflation, remittance benefits, new investment avenues, fast transactions, and decentralization. However, it faces regulatory challenges, volatility, fraud risk, power consumption, and impact on traditional banking.
What crypto exploded in 2023? ›
Sponge V2 – Upgraded Token Version of a Popular Meme Coin, Providing 100x APY in 2023. Sponge V2 is the second generation of the $SPONGE meme coin, which exploded 100x after launching in 2023. At its peak, $SPONGE carried more than a $100 million market cap.
Is crypto high risk? ›
How safe is cryptocurrency? Simply put, cryptocurrency is in the “high risk, high reward” category of investments. It's considered much riskier than investing in traditional stocks because the sector is still highly speculative at this point.
It is theoretically possible. Bitcoin has been around for close to 15 years now, and although it has survived several dramatic crashes before making new highs, its extreme volatile nature puts investors at risk of losing all their money.
Is cryptocurrency real money? ›
Cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services or traded for a profit. Bitcoin is the most widely used cryptocurrency.
Why do most people lose money in crypto? ›
From poor security practices to a lack of knowledge about crypto markets, new investors can quickly lose money. Here are the 10 most common mistakes new crypto investors make and how you can avoid them.
Do most people lose money in crypto? ›
It's not that no one has made money off crypto. In fact, our survey finds that of those who've had crypto, 28% sold it for more than it was worth. But a higher rate of investors — 38% — sold their crypto for less than it was worth when they bought it. Another 13% broke even.
Can you lose money with crypto? ›
While not all cryptos are same, they all pose high risks and are speculative as an investment. You should never invest money into crypto that you can't afford to lose. If you decide to invest in crypto then you should be prepared to lose all your money.
What are the legal issues with cryptocurrency? ›
Some of the largest issues with cryptocurrency are regulation and consumer protection. Even though they use distributed ledgers, cryptocurrencies remain susceptible to fraud such as investment schemes, price and market manipulation, unregistered exchanges involved in fraud, and insider trading schemes.
Can you lose more than you invest in crypto? ›
For instance, if you took a loan to invest in crypto, or if you're investing in any form of complex derivative instrument associated to crypto, instead of just the cryptocoin itself. You may end up with losses on the investment, plus an additional debt.
What is the safest crypto to invest in? ›
Here are six of the best cryptocurrencies to buy now:
- Bitcoin (BTC)
- Ether (ETH)
- Solana (SOL)
- Avalanche (AVAX)
- Polygon (MATIC)
- Cardano (ADA)
Thinking about investing in the popular cryptocurrency? A recent report predicts that Bitcoin will reach a new all-time high in 2024. Bitcoin (BTC) is expected to reach a new record of $88,000 (€82,000) throughout the year, before it settles around $77,000 at the end of 2024, according to a new report.
