Cryptocurrency investment is a bit different than investing into stocks or bonds. Cryptos are probably the most volatile assets that you can invest in. This means that the price of a coin can drop thousands of dollars in just a few days or even in a few hours. This means you can lose all your money in a day. Some people tend to invest their entire life savings, or they even take loan just to be able to invest into cryptocurrencies. These are incredibly dumb ideas and if you have thoughts like this, we highly recommend to forget about it.
We are going to share with you the three main risk that can lead to lose your invested money.
Lack of understanding
The first thing why cryptocurrency investments are risky is because many people have no idea about the technology behind it, or they don’t have enough information on the background of the coin they are investing in. A lot of people just jumped on the „bitcoin boat” just because they read it on the internet or heard it from some friends that it could make you rich quickly. Yes, but they forgot to mention that it could also make you broke as hell, if you don’t know what are you doing.
Just like in every other investment, you need to do a deep research and you need to understand what are you investing in. In this case you need to be aware what blockchain technology is and how it works. You should also know everything about that coin you are planning to invest in. What problem is it trying to solve? Do you think it is going to succeed?
Risk of ICO’s
ICO means Initial Coin Offerings which can be described as the following:
„An Initial Coin Offering (ICO) is the cryptocurrency space’s rough equivalent to an IPO in the mainstream investment world. ICOs act as fundraisers of sorts; a company looking to create a new coin, app, or service launches an ICO. Next, interested investors buy in to the offering, either with fiat currency or with preexisting digital tokens like ether. In exchange for their support, investors receive a new cryptocurrency token specific to the ICO. Investors hope that the token will perform exceptionally well into the future, providing them with a stellar return on investment. The company holding the ICO uses the investor funds as a means of furthering its goals, launching its product, or starting its digital currency. ICOs are used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.”Source: Investopedia
Now you can understand that why ICO-s are risky. There is no guarantee that your investment will make you high returns. Many people lost their money because they invest in ICO-s like it is some kind of gambling. ICO-s could get you a ton of money, but only if you are doing it right. Always do a research before you invest.
Every year serious amount of cryptocurrencies are stolen from different exchanges or wallets. Even the biggest exchanges have to face this issue. Most of them have a very reliable security system, but hackers can get their way through that sometimes.
Here are some of the biggest hack attacks from this year
- BitHumb 30 million
- Coinrail $37 million
- BitGrail $195 million
- Coincheck $534 million
The best way to avoid getting hacked is to store your cryptos on a hardware wallet. These wallets are not connected to the internet, they are just like a pendrive. These wallets cannot be hacked, but you need to keep them safe, because if you lose it, your money is gone.
Cryptocurrency investment isn’t for everyone, but it can be learned in a few months. If you would like to trade your assets or buy cryptoccurencies on a highly trusted, safe and reliable exchange platform, we suggest you to use our platform, The Peak.