The entire world is buzzing with crypto talk, a wave that has permeated even the corners of Africa. Several get rich quick (Ponzi) schemes now promise fabulous returns from Bitcoin trading: 15% daily 40% monthly. All which are possible. Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies. Bitcoin became the first decentralized cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. Assuming someone invested about N1 million in Bitcoins in January this year, chances are that the investment would be worth about N2.6 million today. Bitcoins were indeed 160% up sometime this year. Ethereum, another cryptocurrency has even fared better. If you invested N1 million in Ethereum in early January, that investment will be worth a whopping N45 million today. The coin rose from about $8 earlier in the year to $375 as at June 19th, 2017. The value proposition of cryptocurrency has made it of the most sought-after investments in the world. For newcomers looking to get in on the act, the upward tendencies may seem too promising to bother about the downsides. Nevertheless, like any investment, especially those that produce mammoth returns, there are certain risks people must watch out for before they yield their necks to the nose.
Unlike prices of normal goods and commodities, the prices of cryptocurrencies fluctuate randomly. A weekly gain of 50% could easily become a 1000% loss with the bat of an eyelid. Just picture a $100000 portfolio suddenly depreciating to a $10000 in a few days. One could buy cryptocurrency now and in just about a matter of minutes, lose everything including the capital. For example, as recently as May 25, Bitcoin plunged 13% in just a few minutes. Similarly, some time ago, Bitcoin lost 16% of its value in one day. Cryptocurrencies are highly volatile investments and react widely to market information and news. Sometime late June this year, the rate of Ethereum fell sharply after a false report on the death of Vitalik Buterin, the creator of the cryptocurrency. During the day, Ethereum lost about 15 percent. So if you’re not the type who monitors prices constantly, investing in cryptocurrencies isn’t for you.
Everything about cryptocurrency is virtual and conducted online. So the possibility of a crash is high, in fact, cryptocurrencies have suffered many high-profile failures over the years. 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.
If the fact that cryptocurrencies are conducted online is considered risky, then surely hackers pose even heavier threats to the scheme. Criminality and controversy have stalked the idea of cryptocurrencies. But it’s not just the marketplaces and currencies that are subject to misfortune. Malware created specifically to steal Bitcoin and any of the other cryptocurrencies currently in circulation has emerged, fuelled by a rapid increase in the value of Bitcoins as the currency became more popular. Attacks are commonly aimed at wallets and the compromise of private keys. Just recently Ethereum, suffered a plunge in value when a hacker exposed weaknesses in DAO’s Ethereum construct and stole over $50 million. The price of Ether was nearly cut in half from the incident. Similarly, the problem of safely storing your cryptocurrency is there, with virtual and physical thieves ready to steal them. One thing is perfectly clear however, criminals have already adapted their attacks to include these platforms wherever and whenever the opportunity arises.
Insomuch as Bitcoins and Ethereum are the most popular cryptos there are plenty cryptocurrencies around the world with each trading on its own value. This, however, does not suggest that the current optimistic feeling in the cryptocurrency market translates to positive gains for every coin out there. Remember, the ability of a crypto to post positive gains or losses depend largely on how popular it is and who the backers are. One mustn't fall the victim by buying a crypto that is not common. One way of determining what currency to buy is looking at its market capitalization. The larger the market cap and trading volume, the likely it is that you can easily sell it whenever you wish.
While many people will continue to see cryptocurrencies as the promising trading unit, it is important that anyone who wishes to invest do so with both eyes open and aware of the risks associated with the business. This is because High gains often come with several risks.
Bitcoin has been depicted as a decentralized, distributed virtual cash that is utilized like cash. It can be traded for conventional monetary forms, for example, the USD/Euro, or used to buy merchandise or administrations, typically on the web. Not at all like conventional monetary forms, Bitcoin is another innovative creation, doesn't have any authentic information track records (e.g. trustworthy) works without a focal specialist or banks and is not sponsored by any administrations or other legitimate substances.
On one hand, Bitcoins offers a few preferences; being another innovation, it likewise represents a few dangers.
Preferences of Bitcoins
Cases of caution signs incorporate, however not constrained to:
a. proposing an "Ensured" high speculation returns, which could essentially be a Ponzi, MLM plot or a trick
b. Spontaneous offers by unlicensed private gatherings
c. Gathering insights about total assets, reserve funds, or pay
d. Offers sound pipe dream
e. Putting over the top strain to purchase "At this moment"
While client protection and privacy are our at most concern; our inward system likewise permits the properly assigned specialist to record and report potential dishonest/unlawful practices (e.g. Ponzi plans, financing fear based oppression, and so on) that use our frameworks, systems, or administrations. Such exercises will be altogether examined by our administrative and compliance team and will be forwarded to concerned specialists for detailed investigation.
The accompanying dangers can be noted in exchanging Bitcoins:
Some other extra dangers ("obscure")