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Home Markets Cryptos

Another 3 Risks to note when investing in cryptocurrencies

Onome Ohwovoriole by Onome Ohwovoriole
June 26, 2017
in Cryptos, Financial Literacy, Markets, New to Investing
Another 3 Risks to note when investing in cryptocurrencies
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The whole world seems to be a buzz with crypto talk, and Nigeria is not left out. Ponzi schemes now promise fabulous returns from bitcoin trading: 10% daily  50% monthly. All which are possible. The more profitable an investment, the higher the risks involved. So what are the risks of investing in cryptocurrencies ?

Cryptocurrencies are highly volatile: Unlike buying shares or real estate, the prices of cryptocurrencies change every second. You could gain 50% in a week. Or lose a 1000% while you sleep. Imagine a million Naira portfolio suddenly worth a N100000 in a few days. So if you’re not the type who monitors prices constantly, investing in cryptocurrencies isn’t for you.

The crypto field has a fast level of obsolescence: The value of a cryptocurrency is based on the adoption of the block chain or technology on which it runs. Think of it as the battle between Samsung, Nokia, and Apple. 10 years ago, who would have known that a brand like Samsung would outsell Nokia. Then came Tecno which has out sold Nokia, and is giving Samsung a run for its money. Who could have known 20 or 30 years ago, that a type writer would become  obsolete ? The same applies to cryptos. Bitcoin and its form of block chain technology started the race. Ethereum is hot on its heels and is on course to be the most popular of them all.

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There is no referee or safety net: In most countries, governments tend to regulate industries to prevent criminals from exploiting people. Governments regulate the stock and currency market to prevent price manipulation.You can sue a real estate agent if he dupes you. Who do you hold responsible if your bitcoin wallet is hacked ? Or when people with lots of money manipulate crypto prices so they can buy cheaply ? The answer ? No one. Some countries like China   have tried to implement rules on crypto trading. Most governments don’t know what to do about it. They just don’t understand it.

Explore more risks of investing in Cryptocurrency

Tags: BlockchainCryptocurrency
Onome Ohwovoriole

Onome Ohwovoriole

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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