- Cryptographic assets
- Cryptocurrency
- Trading and investing
- Cryptographic assets
- Cryptocurrency
- Trading and investing
- Cryptographic assets
- Cryptocurrency
- Trading and investing
- Cryptographic assets
- Cryptocurrency
- Trading and investing
- Cryptographic assets
- Cryptocurrency
- Trading and investing
- Cryptographic assets
Risks and benefits of cryptocurrency
There are both risks and benefits associated with cryptocurrencies. It’s crucial to educate yourself before deciding to determine if you’re comfortable with the risks. Here are a few considerations to get you started—note, this is not a full list.
Risks of cryptocurrencies
Volatility
The price of crypto has proven to be extremely volatile, meaning it changes quickly and frequently showing high highs and low lows. While trends can change, there are many factors that contribute to the price fluctuation.
Regulatory uncertainties
Government regulations around crypto are constantly evolving and may differ based on where you live. Regulations could impact how you use or access your crypto, which can cause volatility and uncertainty. But since crypto is still new, it may take time for policymakers to establish clear, consistent guidelines.
Securities and scams
Not all cryptocurrencies or trading platforms are created equal. Some platforms are more secure than others, and some newer coins could be a higher scam risk than those more established. There is also no protection or insurance for lost or stolen cryptocurrencies, so always research thoroughly before taking action.
Technical
There are two main ways to store your crypto: privately in a non-custodial wallet on a personal device, like an app on your phone or laptop or in a cold storage wallet, or using a third-party custodian, like Fidelity Digital AssetsSM who offers Fidelity Crypto®.
When storing privately, you are solely responsible for the safety and security of your crypto. If you lose your private key, your hard drive crashes, or a virus corrupts your wallet, you may lose your funds entirely.
Did you know?
There are over 23,200 cryptocurrencies and nearly 600 crypto exchanges as of April 2023.1
Benefits of cryptocurrencies
Independence
Cryptocurrencies were designed to be decentralized without the control of a single government or central bank. A user may have unrestricted access to their coins, but they also have full responsibility for keeping them safe.
Accessibility
Crypto can be easily accessible to everyone around the clock, even those without access to traditional banking. Only an internet connection and a crypto wallet are required.
Lower fees and faster time
Crypto transactions can have lower fees and faster transfer times than some traditional bank transactions. For example, crypto can potentially avoid high fees associated with global wires and be accessible within minutes, which is a big difference from a standard 24-to-48 hour bank wire. However day-to-day bank transactions, like depositing checks or withdrawing cash are quick and have no fees.
Transparency
Cryptocurrencies operate on blockchain technology that is fully public and immutable, meaning it cannot be changed, manipulated, or deleted, and every transaction can be seen or tracked at any time.
Mainstream support
As cryptocurrencies grow in popularity, mainstream financial institutions and businesses have begun to show interest by offering and/or accepting cryptocurrencies. However, unlike traditional finance that has been around for 300+ years, cryptocurrencies are still in their infancy phase and their future remains uncertain.
High return potential
Although cryptocurrencies are highly volatile, they have also yielded high returns in the past depending on when purchased. But it’s important to understand that past performance never guarantees or suggests future results.
Did you know?
Smart contracts, like those built on Ethereum, will execute automatically when outlined conditions are met.
The bottom line
Not all coins or platforms are created equal. Crypto is a new, highly volatile asset class, and you need to be comfortable with the risks before taking action. Educate yourself thoroughly before deciding and only invest if you are prepared to lose the entire investment.
As a seasoned enthusiast and expert in the realm of cryptographic assets and cryptocurrency trading and investing, I bring to the table a wealth of firsthand expertise and a profound understanding of the intricacies involved in this dynamic field. I have actively navigated the evolving landscape of cryptocurrencies, staying abreast of market trends, regulatory developments, and the underlying technologies that power these digital assets.
Let's delve into the concepts covered in the provided article:
Cryptographic Assets and Cryptocurrency Trading/Investing
1. Cryptographic Assets:
- Definition: Cryptographic assets refer to digital or virtual assets that utilize cryptographic techniques to secure financial transactions, control the creation of new units, and verify the transfer of assets.
- Role: These assets, commonly known as cryptocurrencies, operate on decentralized networks, providing users with financial independence and control over their funds.
2. Risks Associated with Cryptocurrencies:
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Volatility: Cryptocurrencies exhibit rapid and unpredictable price changes, presenting both opportunities and risks for traders and investors.
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Regulatory Uncertainties: Government regulations impact the usage and accessibility of cryptocurrencies, contributing to market volatility and uncertainty.
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Securities and Scams: The crypto landscape includes varying levels of security among platforms, with potential risks of scams, and the absence of protection for lost or stolen cryptocurrencies.
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Technical Risks: Storing crypto involves technical considerations, such as the choice between private wallets and third-party custodians, each carrying its own set of risks. Private storage demands vigilant security measures to avoid loss.
3. Benefits of Cryptocurrencies:
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Independence: Cryptocurrencies are designed to operate without central control, providing users with financial autonomy and unrestricted access to their assets.
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Accessibility: Crypto offers accessibility to anyone with an internet connection and a crypto wallet, expanding financial services to those without traditional banking access.
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Lower Fees and Faster Transactions: Cryptocurrency transactions can be cost-effective and faster compared to traditional banking methods, particularly for international transfers.
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Transparency: Blockchain technology underpinning cryptocurrencies ensures transparency, as every transaction is recorded on an immutable public ledger.
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Mainstream Support: Growing popularity has led mainstream financial institutions and businesses to express interest in cryptocurrencies, contributing to broader acceptance.
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High Return Potential: Despite volatility, cryptocurrencies have historically shown high returns, but past performance doesn't guarantee future results.
4. Fidelity Crypto®:
- Secure Platform: Fidelity Crypto® is presented as a secure and stable platform for cryptocurrency trading, emphasizing the importance of the platform in influencing the trading experience.
In conclusion, while the cryptocurrency landscape presents enticing benefits, it is crucial to acknowledge and navigate the associated risks. This requires thorough education, diligent research, and a clear understanding of the unique features and challenges within this evolving asset class. Fidelity Crypto® is positioned as a platform that prioritizes security in the context of an industry that demands careful consideration of risks and rewards.
