TechTheDay

There’s no denying that investing in cryptocurrency can be a potentially lucrative prospect, especially in today’s digital age. However, like any investment, it’s not without its fair share of risks. And you could end up losing all your money if you fail to do it the right way. With that in mind, let’s dive into it to determine whether or not you should invest your hard-earned money into it.

Risks associated with cryptocurrency

More than the stock exchange, cryptocurrencies are much more vulnerable to cyberattacks. Many investors have already experienced sizable losses because of security breaches that have resulted in the theft of these digital currencies, prompting third-party insurers and many exchanges to offer a greater level of protection from cybercriminal activities.

Also, the safe storage of cryptocurrencies is more challenging than bond or stock ownership. Many exchanges like Coinbase make it relatively easier to trade crypto assets, such as Ethereum and Bitcoin, but most people aren’t too fond of the idea of keeping these digital assets with an exchange because of the risks associated with enabling a company to gain control of them.

Of course, this means that centralized exchanges take away the control of the owner of the assets. It may freeze them if requested by the government, or they may be rendered irrecoverable if the exchange goes bankrupt. For this reason, some owners opt for cold storage options like hardware wallets. However, this also comes with challenges, explicitly losing the private key. Without it, access to the cryptocurrency asset will be impossible.

Moreover, there’s no guarantee or assurance for the crypto projects to succeed. Competition remains fierce among many blockchain projects, and a considerable number of them are scams. In other words, not many available cryptocurrencies will thrive and flourish. There’s also a good chance of regulators cracking down on the industry if governments begin to view them as threats instead of the innovative technologies they should be.

Adoption of cryptocurrency

Despite all of their risks, the blockchain and cryptocurrency industry continues to grow stronger. The necessary financial infrastructures are being built and more and more investors are gaining access to institutional-grade services. Both individual and professional investors are starting to receive the tools that they need so they can safeguard and manage their cryptocurrency assets better.

Although there are other factors that impact cryptocurrency’s riskiness, the rapid pace of its adoption is an indicator of the industry’s maturity. For many investors that are looking to gain crypto exposure, it’s a safe bet, even when investing a considerable amount of financial resources.

Conclusion

Investing in cryptocurrency can help diversify your portfolio because they’ve historically shown very few correlations in price with the United States stock market. Those who believe that the usage of cryptocurrencies will become widespread should probably invest in it. However, it’s a rule of thumb to research which cryptocurrencies are likely to succeed before making any commitments. Moreover, it’s crucial never to go beyond your financial limits.