Introduction
Cryptocurrencies have become a popular investment class and a way for individuals to bypass banks. However, the market is new, unregulated and volatile. People who invest in cryptocurrencies should be aware of the risks they are taking on with these financial instruments.
Cryptocurrencies are not formal money.
- Cryptocurrencies are not formal money.
- They are not legal tender, and they don’t have any backing from a central bank or government.
- Bitcoin and other cryptocurrencies may be used as a medium of exchange in some places, but it’s not widely accepted as an official form of payment.
- For example: You can’t use Bitcoin to pay your taxes in the United States; instead you must pay using U.S. dollars or another currency that is recognized by the federal government (like Euros).
They’re vulnerable to theft and fraud.
Cryptocurrencies are not protected by the same laws as real money.
Unlike fiat currencies, which are backed by federal governments and central banks, cryptocurrencies don’t have any government support. This means that if you lose your private key to a cryptocurrency wallet, there’s no central authority to help you recover it or get back any funds stored in that wallet. If someone steals your private key or steals one of the computers storing it (or simply deletes all copies), that money is gone forever–and there’s nothing anyone can do about it except hope they’ll get lucky enough to find another copy somewhere else on the Internet somewhere down the line sometime later on in life after they’ve grown old enough where death doesn’t seem like such an immediate threat anymore so long as one lives long enough into old age without dying early due
to illness/disease first before reaching retirement age where most people tend not worry too much about dying young again after reaching retirement age since they’re no longer working full time jobs anymore anyway so therefore wouldn’t need their savings anymore anyway since there won’t be much left after paying off debts from loans taken out earlier during college days followed by buying houses later down road once kids grow up outta college themselves too – but what does this mean?
There is little regulation of the market.
It’s important to acknowledge that cryptocurrencies are not regulated by governments. In fact, there are very few regulations on the market at all. The SEC has not approved any cryptocurrency as a security, so if you buy into one of these coins and it turns out to be fraudulent or scams its users, there isn’t much anyone can do about it–including yourself.
The CFTC does not regulate cryptocurrencies either; this means that the agency has no jurisdiction over how exchanges operate and who buys/sells them on these platforms (though they do have some oversight over derivatives). Cryptocurrency isn’t regulated by FINRA either because it isn’t considered “money” under federal law (though some states consider it property).
Their value is volatile, like stocks or bonds.
Volatility is a measure of risk. The more volatile a currency is, the more risky it is to invest in because its value can change dramatically from day to day and even minute-to-minute.
The volatility of bitcoin has been decreasing since its inception due to increased adoption and regulation by governments across the globe. However, this trend has recently reversed itself with increased volatility in 2019 as cryptocurrencies like Bitcoin go mainstream again after being largely ignored during 2018’s bear market (a period when prices decline).
Cryptocurrency has no inherent value.
Cryptocurrency is not backed by a government or central bank. Instead, it’s based on supply and demand: if people want something enough and are willing to pay for it, then the value will increase. This means that cryptocurrency has no inherent value–it’s all relative to what people think its worth at any given time.
Cryptocurrency is a digital medium of exchange that allows users to conduct transactions without the need for banks or other third-party financial institutions; instead, it uses cryptography (the science of encoding messages) as a means of verifying payments through blockchain technology
People should understand that cryptocurrencies are not financial instruments but rather speculative investments.
Cryptocurrencies are not financial instruments but rather speculative investments. They are not backed by any central bank or government, they are not regulated by any government, they do not have intrinsic value (because they are not backed by assets), and they are not legal tender in any country.
In other words: cryptocurrencies don’t represent anything real at all! The only reason people invest in them is because other people have been willing to buy them before them–but if no one else wants them anymore then you’re stuck with an asset that has no value whatsoever!
Conclusion
In the end, we need to be aware of the risks and rewards of cryptocurrency. It’s important not to get caught up in the hype surrounding these digital currencies but rather take a step back and look at them from a rational perspective. There are many factors that contribute towards their success or failure as an investment opportunity, including how well they’re regulated by governments worldwide.
