Rimsha Salam

The Risks of Cryptocurrency Trading & Investing Cryptocurrencies are trending for quite a while now in the trading and investment world. There are a lot of supporters that claim that rates are going to keep skyrocketing while others believe it's just a bubble and will burst very soon. If you are a cryptocurrency supporter and are considering investing or trading then there are quite a few details that you need to be aware of. Cryptocurrency investing and trading can be very risky and there are a lot of ways which can result in you losing all of your money. So be wary before you dive into the crypto trading world. The Risks of Cryptocurrency Trading & Investing: Here are some of the major risks that you will be facing if you invest or trade cryptocurrencies: No Investment Protection: There is no investment protection for your cryptocurrency investments. Your digital coins can disappear at any given time without a trace. This is because cryptocurrency trading is not a regulated market. This means there is an immense risk of your investment disappearing into thin air. Exchanges can shut down, be seized by the government, or steal your money for any given reason without any sort of indication or notification. In 2017 Poland’s oldest cryptocurrency exchange BITCUREX disappeared. The exchange shut down its operation and went offline in February this year. A total of 2,300 coins vanished. No explanation has been provided as to why this happened. BITCUREX had also been hacked in the previous year and had been forced to shut down temporarily due to a $1.5 million hack. Some other the exchanges that have pulled some shady stuff in the recent years are MCXNOW, GBL, MYCOIN. That is why it is crucial to properly vet your selected exchange and make sure it is reliable before you begin investing. Exchanges can be Hacked: If there are vulnerabilities in the system, hackers can exploit them and hack the exchanges to steal your cryptocurrency. This is not new and has happened before as well. Individual accounts, as well as complete exchanges, have been robbed of their digital currencies. MT. GOX was one of the largest bitcoin exchange platform. Until it declared bankruptcy. Around $460 million by hackers from the exchange. This was mostly owed to the company’s mismanagement and inexperience. MT. GOX admitted to having weakness in its system whichever exploited by the hackers. If you want to keep your cryptocurrency investment safe and trade securely then make sure to move your cryptocurrency into crypto wallets. Safest options are hardware wallets and paper wallets (cold wallets) because they are safe from getting hacked. Legality Issues: Cryptocurrency may become or may already be illegal in your country. This could create an array of problems if you are investing or trading digital coins. Regularly follow the status of cryptocurrencies in your country. The legal status varies from country to country. Some countries haven’t gotten involved in the cryptocurrency issue yet so for those it could go either way. The possibility of Bank Account Freeze: There is the risk that your bank can hold your account or reject transactions because of the reason that they are related to cryptocurrency trading. Various exchanges have been facing deposit problems this year. Withdrawals have also been delayed in some exchanges. Exchanges like Bitfinex and Okcoin have been facing such problems recently. Both exchanges temporarily halted deposits due to what they cite as “intermediary bank problems”. Losing your Private Key: Losing your private key is a very likely possibility. If you are storing your key on a paper then you can easily misplace it if you are not careful. Other hardware storage like USBs or CDs can be destroyed. Online wallets can get hacked or you can lose access. There have been numerous stories on the internet of people buying Bitcoin and then forgetting about it. Deleting the private key storage file or misplacing the piece of paper they wrote on. A tracking firm Chainalysis estimated that up to 3.8 million Bitcoins have been lost to date. That is nearly a quarter of the limited total supply. And once a cryptocurrency is lost there is no way to retrieve it. There are various ways to store your private keys and you can never have too many backups. So make sure to keep your keys safe in a reliable and secure wallet. Private Keys can be Hacked: Hackers can steal all of your cryptocurrency by getting your private key. They can gain access to your computer via spyware, WiFi network, remote viewer, or the internet. They then copy your private key from where ever you have stored them or your wallet.dat file. Whoever owns the private key, owns the digital coins. Cryptocurrency can have bugs: New cryptocurrencies are popping up at a rapid speed. And while there are many reliable and trustworthy currencies there is always the risk of hidden vulnerabilities. The cryptocurrency you are investing in can have bugs or your transaction can be messed up because of code complication. This could result in your coins being lost forever. Rapid fluctuations & Volatility: Predicting the rise or drop a cryptocurrency isn’t easy. It is an incredibly risky investment. You could lose all or win big because of the rapid fluctuation in rates. Proper research and a thorough understanding are required if you want to be successful at cryptocurrency trading and not lose all your money. Possible Crypto Bubble: There is the prevalent possibility that cryptocurrencies like Bitcoin and Ethereum and in a bubble. And that the bubble will burst soon. If that turns out to be true you could end up losing all of your investment. Lack of Recoverability: If your cryptocurrency is stolen, hacked, or lost there is no way to recover it. Doesn’t matter whether it was lost due to a transaction error. Or if it was stolen or hacked. This is because transactions are irreversible. If someone tries to steal money from your bank account they can probably be caught and the transaction can be reversed. This is not the case with crypto assets. Hence, storing your cryptocurrency and assets is a major issue.