3 Risks associated with crypto-assets

Crypto-assets such as Bitcoin, Ethereum, and Litecoin have become more popular than ever before. Many people have even invested their hard-earned money into these currencies as they believe it to be a lucrative source of investment. However, there are inherent risks associated with investing in these currencies. In this essay, we will discuss three of the main risks associated with crypto-assets.

Firstly, one of the most prominent risks associated with crypto-assets is volatility. Crypto-assets fluctuate in value much faster than traditional currencies making them unpredictable and liable to rapid decrease in value. For example, in December 2017, the value of Bitcoin skyrocketed to almost $20,000 but only a year later, the value plunged to below $4,000. Such drastic changes can result in severe financial losses for investors who do not understand the extent of the volatility in the market.

Secondly, the crypto-asset market is poorly regulated. This lack of regulation can lead to fraudulent practices such as hacking and phishing, which can result in the theft of users' assets. Additionally, cryptocurrencies are often associated with illegal activities such as money laundering and tax evasion, mostly because of their anonymity feature. This makes it difficult for law enforcement authorities to trace and crack down on such activities.

Thirdly, crypto-assets are vulnerable to cyberattacks. Cryptocurrencies operate through decentralized systems, meaning that they are not protected by a centralized authority. This vulnerability can result in hacking attacks on the platform itself, which then makes users vulnerable. When a system falls under cyberattack, it can be difficult to retrieve losses, which often lead to permanent loss of assets.

In conclusion, as the popularity of crypto-assets increases, it is important for investors to understand the potential risks involved. The volatility, lack of regulation and vulnerability to cyberattacks are just some of the risks associated with crypto-assets. It is crucial to undertake thorough research before investing and to seek guidance from trusted financial advisors to avoid financial losses. It is also important for authorities to formulate more comprehensive regulations for the crypto-asset market, ultimately making it a safer option for investors.