Cryptocurrency is a digital or virtual asset designed to work as a medium of exchange that uses cryptography to secure its transactions and control the creation of new units. It’s also decentralized, meaning it’s not subject to government or financial institution control.
Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services — sometimes even anonymously.
Some investors believe that cryptocurrencies are a good investment because they are secure, decentralized, and have low transaction fees. However, many aren’t so sure.
In this article, we’ll provide you with 10 reasons why you shouldn’t invest in crypto.
Warren Buffet: Why You Should Never Invest in Bitcoin (Video)
Here are 10 reasons why investing in cryptocurrency is a bad idea.
10 Reasons Why Investing in Cryptocurrency Is a Bad Idea
- Cryptocurrency is volatile and risky.
- Bitcoin, the most popular cryptocurrency, goes through a bear market every 3-4 years.
- Cryptocurrencies are not backed by any government or institution.
- There is no central authority that regulates cryptocurrencies, so their legal status as an investment instrument is sometimes still unclear.
- Cryptocurrencies are not accepted by many merchants and could be difficult to use for everyday transactions.
- Bitcoins are created as a reward for a process known as mining, but this process is becoming more difficult to perform — no one knows the long-term effect this will have on Bitcoin’s future.
- Cryptocurrencies are not immune to cyberattacks, which could lead to the loss of your funds if you house your private key on your computer or phone.
- Bitcoin and other cryptocurrencies are not regulated by national or international financial authorities, so their value may be subject to significant fluctuations.
- Cryptocurrencies are often associated with illegal activities such as money laundering and drug trafficking.
- There is no guarantee that a cryptocurrency will continue to be profitable in the long term.
The Bottom Line
Cryptocurrency is generally thought of as a get-rich-quick scheme because you’re hoping someone is willing to pay more for it than you — the greater fool theory. While crypto isn’t the only industry like this, it’s nascent and not entirely accepted, or even understood, by old-school investors.
The above are just a few of the many reasons why investing in cryptocurrencies may not be the best decision for you.
Want More Financial Tips?
If you still want to explore this option, be sure to do your research first and consult with a financial advisor to ensure that you are making the most informed decision for your circumstance.