Cryptocurrency It is an investment tool with high return but also high risk.
So what are the risks of investing in this asset? Here are some of them:
1. Market Risk
Market risk is a type of risk arising from the tug-of-war between the supply and demand of an asset. This risk is reflected in the rise and fall of asset prices in investment applications.
In the case of cryptocurrencies The rising and falling prices of these assets can be sharper compared to stocks. Of course, do you remember that the price of TerraLuna token fell 98% from hundreds of USD per unit to less than 1 USD in just 1 week? Luna and Terra aren’t the only crypto assets that go up and down quickly either. There are still many crypto assets that have experienced the same thing.
Disadvantages of cryptocurrencies is that this asset market has no mechanism. auto reject and suspension like the stock market This is because the circulating of crypto assets is not regulated by one special institution as the Indonesian Stock Exchange manages the stock circulating.
Not to mention that there is now a problem. bitcoin halved. Bitcoin is halved It is a term used to deduct profits from mining cryptocurrencies. This decline in the reward could result in a decline in the supply of bitcoin in the market and weaken traders’ interest in trading the asset.
2. Initial Risk
The second risk of investing cryptocurrency As a fundamental aspect, Crypto assets, both coins and tokens, are usually issued to raise funds to carry out some projects that are still relevant to the development of the blockchain world. whether the game New applications, etc. Usually, information about this project is attached to cryptographic technical documentation.
This risk of default arises if the built project fails. fictitious Not enough developers Lack of integrity, etc., which can result in delisting of coins from exchanges and bankruptcy of investors. Unfortunately, many people only invest in crypto with trusted capital and ignore these points. As a result, when prices drop, they are immediately sold.
3. Digital Security Risks
When investing in cryptocurrencies You will use three technologies: mining technology. (Of course, if you want to dig) crypto walletand a blockchain crypto exchange that has to be mined during the mining process could be Relatively safe from cyber attacksBut what about crypto wallets and crypto exchanges?
Both applications still have the possibility of being hacked. There has been a lot of news about crypto exchange applications losing millions of investments due to hacks. In addition to hacking Both applications are also prone to data loss. Either because your seed key is lost. damaged gadget or other problems One disadvantage of cryptocurrencies And other investment tools are no money back guarantee like deposit investments.
4. Fraud risk
As the popularity of crypto assets in Indonesia increases. The number of crimes related to this investment has also increased. The modes vary from claiming to be a crypto trading application to providing investment deposits.
To avoid this risk, you need to remember 3 things:
- Cryptocurrency trading service providers must be registered with BAPPEBTI (not OJK).
- No high return investment without high risk. Can’t get high profits right away
- Until now, crypto exchange applications in Indonesia were designed for long-term investments. (not short-term trading)
There are also many trading applications coming from abroad to try to make money in Indonesia. If you want to use this foreign application service First of all, make sure the service is reliable and legit. because if you lose money The Indonesian police and BAPPEBTI will not be of much help.
5. Liquidity Risk
Another risk that can threaten crypto investors is liquidity risk. Simply put, this liquidity describes how fast the process of buying and selling cryptos is. The faster the crypto assets are sold. The higher the level of liquidity, the better.
Usually cryptocurrencies The most liquid are well known coins such as BTC, ETH, etc. Exotic coins, on the other hand, tend to be less liquid. This asset’s liquidity is also related to price volatility. Assets with good liquidity tend not to go up or down suddenly. and vice versa
Not only secondary market liquidity, crypto liquidity, especially bitcoin, is also threatened due to restrictions on the supply of bitcoin by the developer of this asset. one country There are countries (especially developed countries) that allow or restrict the use of these assets in exchange rates.
6. Economic Risk
Although not regulated by the authorities of any country in the world, investing in crypto assets still carries risks from changing global economic conditions. Especially if socio-economic changes are carried out by developed countries such as the United States, Russia, the United Kingdom, etc.
For example, the United States has shut down bitcoin as a medium of exchange to reduce the likelihood of inflation. So sooner or later many investors will sell bitcoins and exchange them for dollars. As a result, the price of cryptocurrencies fell. The opposite could happen if other developed countries made digital currencies a medium of exchange.
7. Force majeure
force majeure It is a contract that fails because the first party failed to fulfill its obligations to the second because something went wrong with the first. force majeure natural disaster
why force majeure Could it be a risk to invest in crypto? It’s that simple, you invest in cryptocurrencies. Then there’s a big earthquake that disconnects your cell phone from the internet. Your assets may remain because the data is stored in the cloud. But it is possible that the prices of these assets will drop sharply without your knowledge while you are still in the recovery phase.
This can happen if you decide to use a crypto mining service. Mining HostingIt’s possible that a facility from a mining company has caught fire. or affected by natural disasters This makes the mining process unable to continue for a period of time. Surely this will harm investors, right?
That is the risk and weakness of investing in cryptocurrencies This tool can be profitable to a large extent. But you have to remember that big profits come with big risks too. Good luck.