After bursting into the market at the beginning of 2017, cryptocurrency has soared in value from $17.7 billion to nearly $600 billion. It’s the world record for any asset class in history. Bitcoin only has reached the market cap of $118 bln, it is set to rock the boat of the traditional economy. However, not all people are equally enthusiastic about it with some reckoning that Bitcoin is nothing but a scam and investing in cryptocurrencies is a bad idea. Is there a grain of truth in such an assertion? Why not invest in cryptocurrency? Let’s consider a few facts before you start investing heavily in cryptocurrencies.
It’s a bubble that can burst any time
Why Bitcoin is a bad idea? First and foremost, it is and will always be a strictly virtual currency. It bubbled out of nowhere and, let’s be point-blank, does not have any real value, fluctuating in price every day. The hype around it is the only pillar sustaining its existence and popularity. For this reason, opponents call it the greatest pump-and-dump scheme in the history of the world economy. Yes, developers cast their creation in the best light, but there’s always a possibility that this huge bubble can explode one day, and the financial loss of investors will come to quite a sum.
Little do we know about the nature of crypto
Even if you have bags of cash to spare, do not invest in cryptocurrency without understanding how it works — it’s at the very least unwise. How do you invest in cryptocurrency?” The rest of the world is in the dark about crypto, but there’s still an army of crypto investors caught up in the spiral of greed. The price of crypto depends on a myriad of factors (overall supply, technological advancements, marketing campaigns, integration of crypto in apps, etc.) — all of them should be considered. Educate yourself on crypto and financial topics before finding a cryptocurrency worth investing.
Crypto is slow and vulnerable
Overall security and performance of Bitcoin Blockchain leave a lot to be desired. While Visa processes 38,000 transactions per second, Bitcoin Blockchain’s throughput capability is much, much lower: it works at the speed of 5 TPS, and it takes an hour for a transaction to be processed fully. Other current performance issues include: proof-of-work is outdated compared to other protocols, not all cryptocurrencies are equally transparent and decentralized, the vast majority of altcoins are hard to cash out and lack of scalability. To top it off, the Blockchain at its current stage has a lot of security breaches and is prone to hacking. Stealing a huge sum from a crypto wallet is simpler than from a bank account.
Crypto trading is dominated by panic sellers
The vast majority of investing takes place on decentralized exchanges where institutional investors are hardly present. Therefore, the value of coins and force of cryptocurrency trading is in hands of retail investors who are prisoners of their emotions compared to. Because of that cryptocurrencies take a hit, and making short-term predictions is impossible.
Beware of scam ICOs
Bitcoin has provided fertile ground for the new type of financial frauds called “ICO”. Getting money from people on their own accord has never been as easy as today. New companies are popping up around, each with its own token, but all teams have a pretty huge soft cap and hard cap — sums raised reach several million dollars. There is no guarantee that the team will allocate assets the way it’s written in the white paper. Unfortunately, some just disappear with the contributed money.