If you want to invest in the cryptocurrency market, then you have to get used to it’s volatility. Investing in cryptocurrencies is not for the faint-hearted. The market is simply too volatile. In a short period of time, it can reach all-time highs and steep crashes, repeatedly, out of nowhere. The trick is to not let those moments define your actions. In crypto scenes, volatility is part of the game. Just like you enjoy seeing it break new records, you have to get used to the fact that there will be some terrible days as well – with the vast majority of those terrible days dealing double (or even sometimes triple) digit losses! As an investor, you should be keeping a closer eye on the market dynamics.

Regulatory Risks
Regulatory risks mar crypto investments a lot. Negative regulatory changes would have a direct impact on the world’s crypto investments. If China, for example, decides to ban it’s citizens from holding Bitcoin, the price of the digital currency would crash since it’s the largest market for Bitcoin trading. The risk also affects leading Bitcoin startup hubs like the U.S. and the U.K.

Bitcoin Scalability
Failure to handle scalability issues among the network’s participants can present a risk. The blockchain needs to be able to handle much higher transaction volumes than it is currently processing and it must be able to do so within a shorter period of time. Currently, Bitcoin transactions take a long time which might not be great for some transactions. Any significant implementations can be done to the network, but scalability challenges may lead to bitcoin struggling if participants do not agree.

Large-Scale Hacks On Bitcoin Companies
Cyber-attacks have negatively impacted the price and development of bitcoin and other cryptos. The hack of Mt. Gox in 2014 and the Bitfinex hack in August 2016 both pushed down the price of the digital currency. Since Bitcoin’s inception in 2009, about one-third of bitcoin exchanges have been hacked hence depicting the risks of large scale hacks.

Encryption Risks
Digital currency’s encryptions could present a potential drawback. The crypto coding identifies the currency itself, but not it’s owner. Whoever holds the coin’s encryption code becomes it’s owner, and there’s nothing in the coin’s coding that identifies the specific owner. This built-in anonymity feature means when a coin is stolen, it’s gone. Moreover, criminal hacking of private encryption keys and transferring the stolen Bitcoins to other accounts is permanent and irreversible.

Tax And Insurance
The US Internal Revenue Service considers Bitcoin and other cryptocurrencies as taxable. Bitcoin is ineligible to be in any tax-advantaged retirement accounts, and there’s no legal solution to shield the investment from taxation. In terms of insurance, Bitcoin accounts are not covered by any type of federal or government program. Therefore, a collapse in it’s value means a slip in the overall investment.

Criminal History
Electronic currency has been linked to several criminal acts due to their anonymity brought by the P2P transactional nature. In fact, FBI fears the growing popularity of Bitcoin with criminals who are difficult to identify and obtain their suspicious records. Further regulations and possibly a risk of currency collapse are possible if this trend continues.

Cryptocurrency Volatility & Derivative Markets
Cryptocurrencies have large price fluctuations up and down, sometimes rapidly or seemingly on a whim, which makes them a risky medium for business contracts that last for any amount of time. Traders could really profit from cryptocurrency derivative markets. LedgerX and the KyberNetwork are a couple of startups which allow for the trading and exchanging of digital assets, who have derivative trading available to help mitigate the risk of high price fluctuations.

Cyptocurrency Funds
Some cryptofunds offer enthusiasts easier ways to invest in cryptocurrencies with fewer risks. Social trading network eToro recently launched the cryptocurrency CopyFund, an investment instrument that covers a diversified portfolio of cryptocoins that have above $1 billion in market cap. This includes Bitcoin, Ethereum, Ripple, Ethereum Classic, Litecoin and Dash. Cryptofunds provide a broad selection of investment opportunities managed by experts, while at the same time lowering investment risks and costs.

Custom Coins
ICOs have provided companies a totally new way to fund their projects using blockchain and cryptocurrencies. ICOs have helped blockchain projects bypass the traditional VC process and raise hundreds of millions of dollars. Companies like famous messaging app Kik raised it’s venture capital but chose ICO for it’s latest round of funding.

Bancor, a Switzerland-based nonprofit foundation democratizes the creation of cryptocurrencies by providing smart tokens and wallets, as well as community features such as discussion groups, profiles and stats. It’s proprietary protocol executes through smart contracts which run on the blockchain. The Protocol enables liquidity and price discovery for tokens, and conversions between different crypto tokens, cryptocurrencies, and fiat currencies without the need for brokers or centralized exchanges.

Investing in cryptocurrencies simply requires getting verified on an exchange that includes your coin of choice. Keep your tokens safe by storing your private key in a wallet. Use the public keys between the exchange and your wallet to seamlessly transfer your cryptocurrency. A new and notable wallet is DinarDirham’s multi-asset, secure, & advanced digital wallet app, bcmy.io, where you can buy and trade in cryptocurrencies, become a merchant, find merchants, and much more.

The Blessed Cryptos
The Lisk platform, launched in 2016, successfully raised US $5.8m in a short amount of time to win investors joy. The crypto-project team has been adding improvements to the project and it’s wallet. The team also liquidates some of their Bitcoins raised during the ICO as part of their liquidation plan. A total of 101,000 BTC remains under their control, according to a recent Twitter update.

The Ethereum ICO successfully raised US $18m over the course of 42 days, making it the number one most funded ICO in cryptocurrency. Ever since receiving that amount of funding, Ethereum has quickly grown and successfully became the second-most valuable cryptocurrency ecosystem in the world today.

Doomed Cryptos

PayCoin was launched in the fall of 2014 by Josh Garza and GAW miners. The white paper called for new variations of blockchain technology that would produce a new breed of cryptocurrency. It’s launch made it one of the largest cryptocurrencies in the world by market capitalization. However, Paycoin was shut down on 2015 when people lost faith considering it’s failed promises and the infamous $20 PayCoin floor.

DAO hit rock bottom on June 18th, 2016, when the DAO Smart Contract was attacked, resulting in a loss exceeding $50 million USD. Consequently, traders dumped the DAO token resulting in a fall in the price. Following the attack, Ethereum Foundation developers proposed a hard fork of the Ethereum blockchain that would roll back the attack and return the stolen funds to their owners. This proposal sparked outrage throughout the cryptocurrency community on the grounds of immutability.

Despite cryptocurrency’s volatile nature, their mainstream recognition seems to hold grounds now and in the future. However, be cautious. Study up before making any investments, particularly with cryptocurrency. Diversify. Never invest what you’re not willing to lose. Get professional guidance. Perhaps consider using our multi-asset, secure, & advanced digital wallet app: bcmy.io, where you can buy and trade in cryptocurrencies, become a merchant, view a merchant map, and much more. It’s available on the Google play store. Visit the website for more information.

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