You have probably heard about the crypto boom that is currently taking the world by storm as crypto has just hit all time highs yet again; and as crypto enters the news spotlight new investors wonder if it is safe to invest into cryptocurrency.
This question is hard to answer as the crypto boom is a new emerging financial system that isn’t as accepted as stocks, commodities and securities. In our opinion although crypto is a new emerging asset class the risks is really no different to traditional stocks or other asset investments, the only real problem with crypto is that it is extremely volatile and history shows that it can have massive high swings and drops in prices.
Cryptos Unknowns
Although investors have a basic understanding of how crypto works in regards to validating transactions, we still don’t know the founder of Bitcoin! This can be seen as troubling as there might be a small percentage of people who can move the market whenever they want. It also raises problems as we don’t know the full intention of why bitcoin or other cryptocurrency’s were created as it could lead to rug-pulling where the owners sell all their coins resulting in the crypto’s value to drop to almost $0.
Regulation
As crypto is gaining speed so is the crypto hackers and crypto scams that follow, as such the US government has taken an eye into regulating the crypto space. This can be seen as both a good thing and a bad thing, this is due to regulation causing crypto to be safer and controlled by the government financial institution. The bad thing is that crypto is meant to not be controlled by anyone or any government control, as it makes the financial intuition run by the people for the people.
- Regulators have struggled to keep up with the growth of crypto causing rules that may not be applicable for future advances and may be too encumbering for the current financial space.
- Regulators can work together to create policies and rules that adapt to the ever changing online crypto space.
- Regulation can hinder the explosive growth that crypto is currently facing as investors may lose confidence.
Overall crypto is safe investment for newbie traders and even experienced traders, just note that crypto is a new booming space and you must be ready for big drops in the market and even higher returns if there is enough liquidity.