Life is a journey of ups and downs. There are silver lining moments in your life and even the rough patches you go through. A considerable part of it could be due to financial reasons. Liquid money, for the most part, is very motile. There are always inevitable losses that can be caused due to a barrage of reasons. Still, an essential aspect of financial intellect is accepting that you can lose money over time, but one should know how to minimize those losses to the maximum amount.
Personally speaking, we invest various resources into day-to-day activities without even realizing it. If you want to understand the system of the crypto market, visit this site to learn how to make money off of trading forex and cryptocurrencies effectively. You could be investing your precious time to learn a new skill or teach one which is a productive investment, or you could be investing your time while chilling or watching TV shows which can be an unproductive nature of the investment.
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Investing is an extensive territory in the area of finance. Investing money into profitable ventures takes a considerable part of finance. Most activities in our society would not be possible without investing. Infrastructure, Govt. projects, education, starting a business are some of the few activities that require substantial investments. Investing need not be only of a monetary aspect. Let us now look at the various hurdles traders usually face while trading cryptocurrencies.
Hurdles you are likely to face while trading Cryptocurrencies
Investors all around the world face inescapable hurdles during their timespan as active traders. This applies to all forms of currency – physical currency as well as cryptocurrency. A really high drawback is the magnitude of loss with cryptocurrencies.
It isn’t the same with physical currencies, though, because you don’t store it all at once, and you, more often than not, while facing losses, lose only a specific portion of your money. So without further ado, let’s take a look at the pitfalls one can expect while trading cryptocurrencies.
Security Issues
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Although highly secure, cybersecurity can be questioned every once in a while. All human constructs can be bent and even broken. This applies especially to virtual constructs or programming of computers which humans do. These laws can be bent and even destroyed, as seen with most hacking cases.
Day by day, the need for better cyberinfrastructure increases due to hackers finding ingenious ways to break through firewalls and causing losses of millions of dollars to companies yearly. For instance, ICO’s (Initial coin offering), which are similar to IPO’s have taken a heavy hit because of hackers. They’ve cost investors millions of dollars.
One of the record-breaking losses incurred by investors was during the summer of 2019, which amounted to $470 million. This happens way more often than people think. In order to protect their money from hackers, cyberinfrastructure needs to improve continuously building and rectifying previous loopholes in the system.
Volatility of price
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The price of cryptocurrencies is constantly changing. You, as an investor, will face the effects of price changes. This could be due to various factors such as the demand and supply of cryptocurrencies and competition between currencies that affect individual prices. Other causes, such as the mining of cryptocurrencies, also contribute to the increase in cryptocurrencies, decreasing their price.
Also, due to the lack of minimal use, they have little to no inherent value of their own unless they are intertwined with tangible and intangible assets. Once there is an increase in the adoption rate, then the cryptos are more likely to have an inherent value, and their prices become a lot more stable.
Federal Regulation
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It is a known fact that everything comes at a cost. No matter how insignificant it is, the said act will have repercussions if not in control. It is the general way of the world to establish order amongst chaos. It is essential to do so, or how would we make sense of the things we interact with?
Only through order and control can we help move any activity swiftly without turbulence. The same goes for cryptocurrencies. One of the most significant drawbacks that will affect you while trading cryptos is the repercussion of not having a regulated system for this currency.
In reference to the statement made above that everything comes at a cost, you can either have a two-party transaction system with the risk of no regulations and control or have a three-party system with rules and authority.
The tremendous repercussions of not having control and regulations over crypto make it very risky to protect. Any loss you experience due to cybercrime will not have contingencies set in place if a regulating body is absent.
Loss of wallets
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The final drawback of using cryptocurrencies is that they cannot be recovered if lost from the system. If your hard drive were to crash, it would also mean the loss of your currencies with no hope of retrieval.
Viruses are also a probable cause for the loss of data on hard disks. Once they creep into your system, they corrupt the files present on it, which could also mean your currency. Cryptocurrencies are pieces of unique programming, and even a slight change in their code could change it altogether.
Conclusion
Cryptocurrencies are the future of money transactions. Just as everything else that is turning digital in our lives, transactions are increasingly becoming digital and will virtually vanish from the physical platform. But they do have their own drawbacks and pitfalls.
It is the responsibility of the investor or trader to ensure doing his activities in an optimal way in order to minimize losses effectively. Blindly investing in cryptocurrencies without learning their drawbacks can be a bit of a shocker for you later on.
