The biggest drawbacks of cryptocurrency
People, every day, are getting more familiar with the concept of cryptocurrency and its advantages. Although it has taken more than a decade for the current acceptance of cryptocurrency among society, it is now more quickly becoming popular in the economic system. Cryptocurrency is considered as one of the most promising payment systems for the near future, and that is not the only benefit it has.
It is self-governed, easily exchangeable, private, inflation-proof, decentralized, fast, and these are only some among quite a few advantages of cryptocurrency; however, it is wise to see the drawbacks as well when intending to invest even a dollar or two in a less known market.
So, what are the cryptocurrency drawbacks and concerns one might deem when diving into the pool of cryptocurrencies? Here is a shortlist:
If you are wondering what these terms mean, read on.
Cryptocurrency is based on a blend of technology and financial concepts, with technology having an upper hand. It is not simple for most people to discern the technology behind cryptocurrency, and the massive terminology it brings with it. Most people find the idea challenging and confusing, as it is digital, untouchable money.
According to the statistics, only 5 percent of the Americans said they used or owned cryptocurrency in 2019. Numerous individuals usually consider the cryptocurrency market fraudulent and a place where hackers and criminals are going to deceive them into investing in nothing. That is because the public acceptance and credibility required to broaden the market have not been built well yet.
As technology advances, so do the hackers. Cryptocurrency transactions are all performed online, and “online” is where hackers jump in. Although cryptocurrency and blockchain technology are so secure and private, hackers also always wait in ambush to hunt the prey.
Most of the cyberattacks happen during a transaction. To tackle this issue, the best approach is to choose the most secure cryptocurrency wallet and cryptocurrency exchange. Taking these measures minimizes the risk of being attacked. What is more, fortunately, the security infrastructure of cryptocurrency technology is every day under enhancement. Many strict measures are being taken regarding that.
Cryptocurrency is highly prone to sudden changes. The values fluctuate a lot. In December 2017, the value of a Bitcoin soared to $20,000 overnight, and in just a few days, it plunged to some $14,000. One year later, the price dropped to even $6,000. It costs about $11,000 to purchase a single Bitcoin currently (Oct 2020).
Although the example above is not something happening every year, you need to widely open your eyes and meticulously consider the history behind it. The cryptocurrency market can be so unstable, simply leading to huge financial losses.
Although volatility is something most people know as a drawback for a market, many dexterous traders may use the fluctuations brilliantly for the good; however, if you are new to the market, surely you need to make the lowest risks possible.
In addition to hacking, the irreversibility of cryptocurrency is also one big drawback of the system of which you should never be oblivious. Cryptocurrency transactions are one-time-only actions. There is no undo thing. You cannot reverse them. If you forget or misplace your key, your wallet remains locked and you cannot open it. There is no retrieval option.
Also, the lack of cancellation means that if you mistakenly send your coins to the wrong wallet, you need to take a deep breath and say farewell to your funds. This can simply lead to a nightmare of financial loss. Currently, there is no mechanism to recover the lost cryptocurrencies.
Although cryptocurrencies are famous for their decentralized essence, there are still certain organizations that have a hand in controlling the market and values. The history of cryptocurrencies shows that some organizations are able to manipulate the coins and bring huge swings of prices.
Take Bitcoin, for instance, whose value fluctuated several times in 2017. Many experts believed that the process was manipulation by the Bitcoin creators.
All the drawbacks above should make you vigilant when investing in the cryptocurrency market. The advantages are outnumbered, but it does not allow you to neglect the drawbacks. It seems that we are not far from the days of massive adoption, but it still requires the technology to advance further to overcome the obstacles.
That has been the technology that brought up the cryptocurrency world, and it is the technology that can make it more and more secure, simple, and acceptable for the world. If you are planning to enter the market, do so, but with a good knowledge of the ups and downs. Surely there are incredible opportunities in the cryptocurrency market.