Blockchain is the new buzzword in financial media followed by crypto-currencies, Initial Coin Offerings (ICOs) and tokens. However, there are a variety of risks involved with the crypto trading. You need to equip yourself with the right set of technical skills and supplement that knowledge with the basics of Blockchain technology to ensure your investments remain in the safe zone.
Here is a list of most significant issues that investors should consider before taking the plunge –
1. Loss or Destruction of the Private Key
All cryptocurrencies are stored in a digital wallet. You would need a public key to open a particular digital wallet. There are risks involved with digital keys – it could be lost, it could be compromised or it could be destroyed altogether.
If the private key is acquired by a third party, then this third party may take advantage and access all your wealth.
2. Malicious Activity
Hacking or other malicious activities is very much possible. There is also a possibility of a hacker altering a bitcoin network and create a ‘minin pool’. It may increase the risk that one or several actors could control the Bitcoin Network or other similar Blockchain.
3. Unregulated Trading Platforms and Exchanges
There is a growing discomfort amongst the investors over the unregulated nature of trading platforms and exchanges. There is a concern and need for putting up more safeguards to avoid the cases of fraud, business failure or security breaches, where investors could not be compensated for losses suffered.
4. Uncertain Environment
Digital assets industry involves a high degree of uncertainty. Most cryptocurrencies are not backed by a central bank, a national or international organization, or assets or other credit. It may prove to be a huge disadvantage. If the number of cases where investors get cheated begin to rise then that loss of confidence may bring about a collapse of trading activities.
5. Currency-Conversion Risks
Policies or interruptions in the deposit or withdrawal of fiat currency into or out of the trading platforms may impact the ability of certain investors to convert. That may be a huge deterrent in times to come.