Trading and investing in cryptocurrencies comes with inherent risks that should not be ignored. We at Bitrates aim to help investors both new and experienced mitigate these risks by providing thorough and objective reviews and analysis of all the major wallets, exchanges, coins, and start-ups in the industry. Knowledge is power. The risks involved in investing in a new and uncharted industry are precisely what make cryptocurrencies exciting and potentially very profitable. But, in investment, you don’t get high gains without the possibility of big losses. From the outset, at Bitrates, our goal has been to arm our community with the information necessary to avoid the scams and poor investments that are inevitable in an unregulated and innovative environment.
It is important to recognize that trading currencies, even on the traditional Forex exchange, is risky and based on factors often beyond our control. This is especially true of cryptocurrencies where value volatility has been unprecedented over these first few years of their existence. Very few investments in history have seen such incredible fluctuations. So far, the trend is up and up, but will that always be the case? And, just because the value of Bitcoin is going up, does that mean you can trust anyone who wants to sell you Bitcoin or help you store it etc.? The answer to both questions is, of course, not necessarily.
Any responsible investor should live by the code that you should only risk what you could stand to lose. When trading high volatility assets like cryptos, this is all the more important. There are absolutely no guarantees. While this is where all the profit potential lies, it’s also why crypto trading is fertile ground for mistakes. This is why we believe Bitrates is an essential service. The worst mistake you can make in cryptocurrency investment is to go into it uninformed. Seeking out expert advice, tracking the news, reading reviews, verifying the validity of this or that new company: these are all essential, risk-mitigating practices that we can help you with.
Here are a few general guidelines that we feel are crucial to mastering the risks of cryptocurrency investment rather than falling prey to them:
1. Cryptocurrencies are more volatile and therefore more risky than most any other investment.
As discussed above, the very thing that attracts speculators to assets like Bitcoin is its unprecedented leaps in value. But, with those leaps, comes volatility and the potential for dramatic drops. Buy and invest accordingly. This is not the kind of industry you’d want to sell your home and put all your money into. Invest what you could stand losing.
2. The best way to profit from Blockchain technology is to thoroughly understand it.
While it is always possible to get lucky, your chance of hitting the accidental lottery in cryptocurrencies has likely passed since Bitcoin’s rocket ship rise has brought investors to the industry in swarms. Gaining on investments is all about getting an edge. If you are the least informed, you’re the most likely to lose out. Something as simple as deciding which cryptocurrency to invest in, for instance, depends very much on predicting which ones will survive, which means understanding that technologies that are the most innovative and promising.
3. Laws are in flux and it’s your responsibility to follow them.
Currently, cryptocurrency assets are unregulated and only loosely controlled by federal laws in much of the world. But, this is changing. Increased mainstream awareness and adoption of Blockchain assets carries with it increased government scrutiny. Within the next few years, laws will change. This means everyone involved will need to assess the legality of their actions, not only to avoid penalty, but for the sake of making sound investments. Some cryptocurrency exchanges, wallets, and coins will survive regulation better than others.
4. The Blockchain is not infallible.
The security of Blockchain technology is among its most famous and revolutionary traits. However, anyone who suggests that the un-hackable nature of the Blockchain means there is no risk in investing in Blockchain assets is lying to you. While Blockchain security is unprecedented, that doesn’t mean that all the companies and exchanges providing you with access and storage are secure.
5. You carry the burden of risk
It is always true that the investor is the one who stands to lose the most from an investment. It is especially true in cryptocurrencies where many exchanges, wallets, and other services do not provide any guarantees, and are not yet legally obliged to either. This means you have to rely all the more on your own faculties to assess your risks, and recognize that if something goes wrong, you’ll be the one to lose out.
Again, we believe the best approach to lessening these risks is to acquire knowledge. And that’s what we’re here to help you do.