Cryptocurrency appears to many today as a kind of alternative to money and, at the same time, investment tools. The profitability of operations with Bitcoin for the last year will leave few people indifferent, and the fact that not only a techy casino online but also a more traditional business accepts tokens makes even more users get into it. This is considerably more than you could earn from trading stocks.
We will not aim to dissuade anyone from investing in cryptocurrencies. Simply, we will once again warn and consider as objectively as possible – the risks that people face when investing in bitcoins and other similar assets.
The Risk of Changing Quotes
People buy something for a reason, but for one purpose or another. Cryptocurrencies are purchased for one of two main purposes:
- To be used as a means of payment. This was the original purpose, which nowadays, although still important, is not as important as the second.
- As an instrument of investment and accumulation.
Cryptocurrency transactions are impossible, or at least very difficult, to trace. And it is almost never possible to undo a transaction. Thus, when making transactions with cryptocurrencies, each participant of the transaction, if there is no reliable publicly known intermediary between them, exposes his or her money to risk.
There are a lot of examples online of people transferring virtual money in one minute and then losing their entire fortune, all their savings in cryptocurrency, if they were persuaded by scammers. Even fraudulent transactions can no longer be undone.
For example, the case of the “coin giveaway” that became widely known. You can find a story online about how some people believed that Elon Musk was giving away bitcoins using his Twitter account. All you have to do is fund a certain account, and the money will be returned in double figures.
It would seem that protection against the risk of private transactions does exist – you have to use an exchange, an independent intermediary that can conduct the transaction with a guarantee for the two parties involved.
But even here everything is not so simple. For example, if exchanges go bankrupt, all participants lose money. Such stories have already happened. In addition, the hacking of the trading system led to the loss of client assets. Sites like Einstein, a $16 million loss, disappeared with the money. QuadrigaCX lost access to client accounts worth $140 million, and so on.
That said, the exchange does not have to close completely to deceive customers. Sometimes it is enough, for example, to considerably increase withdrawal rates. Or manipulate exchange rates of cryptocurrencies, over- or underestimating them to their advantage.
Customers can lose money even without anyone’s malicious intent. For example, as a result of a serious technical failure, power outage, media damage, and so on.
Indeed, classic bitcoin has demonstrated its reliability for ten years. No obvious vulnerabilities have been identified in it. However, today’s cryptocurrency market is not just about bitcoin. Will the same happen to other instruments, will they be as reliable?