Without a doubt, cryptocurrency is one of the biggest innovations of the 21st century and 20% of the central banks are considering introducing government digital currencies within the next six years. An article on Cryptoly.net addresses the interest of the central banks but as a private person, you start to wonder if you are really told everything about cryptocurrency and those are the questions we will answer.
The prospect of decentralizing the control of money and breaking the hegemony of governments over the issuance and administration of money has so far proven successful. It has also eliminated the need for a conventional banking system. In a world where most countries have their own unique currency, the idea of having a currency that is accepted everywhere around the world is really a fantastic idea.
The impact of cryptocurrency when fully utilized is capable of birthing a revolution in commerce and industry across the world. While the accolades and encomiums heralding the introduction of crypto have been justified especially based on some obvious advantage over fiat money, there are yet a few grey areas that need to be resolved for it to gain global acceptance. Cryptocurrency has shaped up to be a prospective investment opportunity based on the high yield that is possible; however, there are certain factors to consider before investing in cryptos.
Things you may not know about Cryptocurrency
One very critical characteristic of cryptocurrency is that it is volatile i.e. its price/value goes up and down so rapidly and at short notice. The price fluctuations of crypto’s make it very risky to invest in as you could gain so much or lose so much on your investment. Apparently, most investment platforms have a degree of risk attached to them but Bitcoin VPS is a lot less stable compared to fiat money and this could ultimately hurt the prospect of its adoption as a legal tender. The fixed amount of 21 million BTC available plays a contributory factor to the volatile nature of the currency. The perceived value of bitcoin which is unstable is another contributory factor to the volatility of the currency.
Rate of return
The lack of a centralized authority for regulating cryptocurrency has its own merit as well as demerit. The unavailability of a central administrator of the currency means that the rate of return on crypto is unpredictable. This attribute sometimes makes cryptos synonymous with gambling. You will have to hope that you are lucky and the market favors you. The peer to peer exchange on cryptocurrency without a regulator ensures that there is not enough data for you to be able to predict your rate of returns. This explains why investment in cryptocurrencies may not be tenable for the long term. Investment in cryptos can rise sharply and fall steeply without much notice thereby muddling up the rate of return on your expenditure.
While cryptocurrencies are reputed to be a safe means of exchange due to the blockchain technology it utilizes, there are yet some concerns about fraudulent activity. Simply put, cryptocurrencies are safe for individual transactions; however, the lack of a regulatory body means that it can be used as a channel to siphon or launder money by fraudsters. Cryptocurrencies provide a safe haven for criminal activity to thrive and this will likely impact the adoption of cryptocurrencies by the governing authorities of most nations. The capacity of cryptocurrency to be used for financial crime may not be very apparent at present but as it grows in use across the world, this is likely to become obvious. The government will become powerless in fighting financial crimes carried out with cryptos and their only option may be to restrict or ban the use of the currency.
Little or No Regulation
Once in a while, you may have an issue with your fiat money bank operator and you could simply walk in and get it resolved. With crypto, there will not be such provisions. This may be a big risk because cryptocurrencies are reliant on technology, if hackers are able to find a way into the technology, your loss will not be insured and your money could go off without a trace.
Cryptocurrency has transformed the financial sector in a great way. It has opened up a world of possibilities hitherto unexpected. However, beyond the thrill and excitement of a virtual currency, it is nice to do due diligence to uncover the not so popular downside of the currency. Several investments carry a degree of risk anyway but the lack of a central authority makes the risks attached to crypto’s somewhat more frequent and volatile. While crypto may not be all they say it is we can’t ignore one simple fact, Cryptocurrency is already here.
Author: Bright Elemeje