Still on the issues on risk involved in cryptocurrency investment, I really believe it's a very important topic and it's pivotal that people come to know about the risk in the crypto space to avoid heartbreaks.
There have been many cases of where people committed suicide because of investment in cryptocurrency, things didn't turn out well for them and the investment went up to smokes some into a project that's upcoming or testnet or other cryptocurrency or blockchain related investment and they come to have unrealistic expectations from this investment to the point it made them have commitment in the outside world based on the outcome of this investment which when it didn't happen as expected it lead to great shock and disappointment leading to depression and sometimes even suicide which is rather sad🤦
True losing money at any stage is rather really painful and is not something that I would wish on anyone and true there is no way to completely remove the pain that comes from losing money into cryptocurrency investment but I believe if we are aware of the risk associated with cryptocurrency investment it would help us not to depend on it so much that our life hangs on the outcome of a cryptocurrency investment.
It's really important that we are educated on the risks involved in investing in this highly speculative market so as not to only make plans based on positive outcome we should also have plans, sound sounds for when things goes against the way we expect, having plans for that would help us no to panic when it happens and also help us to know how to respond when it happens and help us not to make engagement or start borrowing money to invest in cryptocurrency knowing it could disappear.
So that's why today also I will be writing on some of the risk associated with cryptocurrency investment that we should be aware of.
.png)
Some risks that comes with cryptocurrency investment
Technology risk:
Well one for the potential risk in cryptocurrency investment could actually come from it's dependence on blockchain, that's cryptocurrency and it whole idea is centered on operation of the blockchain which means if anything were to happen to this technology then cryptocurrency would be at great risk.
Ofcourse blockchain is an advance and well equipped technology true poised to keep getting better despite the passage of time but that have often been said too of other technologies which has become obsolete now, so I mean as man continue to learn and live there could arise or emerge a much better technology than blockchain and people may no longer fancy blockchain as it interest them today and what happens to cryptocurrency and investment in it, cryptocurrency value may drop if blockchain even becomes obsolete or any flaw where to arise in it in the future if it can't catch up with continuous update which would leave cryptocurrency having to operate from an obsolete technology that would be bad for cryptocurrency investors.
Loss of Private Keys:Well another risk that comes from investing in the cryptocurrency market has to do with private keys which gives us access to our wallet being forgotten or lost, in the local banks today even when a user or customer forgets their pin or password they could easily go to the bank and rectify this and regain access to their account since the bank has records of their personal details but that's not the case here.
In cryptocurrency the only way we can access our wallet is using the set of unique private key which is only given once to the account owner an in any even whatsoever if they person loses or forget this private key maybe they forgot or lost even the personal backup or forgot to back it up then automatically they lose complete access to their funds and their is no remedy for this, there is central authority which has the records or anything, our money are simply just gone for all time.
So this is another risk associated with cryptocurrency investment that's really pivotal for people to know and understand, knowing this risk would help people to be careful and store their private keys in a safe and secure place knowing no one else but themselves would be held responsible if they lose it or let it fall into the wrong hands.
Liquidity Risks:
Sometimes many people who get into really small project or invest their money in a project which is not properly funded they discover that when they want to sell their asset next thing is "not enough liquidity" that's to say there is no or little trading volume that's very few people are buying and selling the asset hence no liquidity.
This means that a user could bag millions of this coins but can't sell them since there is no liquidity and that could lead to great financial bags especially when you realize you are simply holding onto empty bags or coins that have no real value which is a great risk well familiar or common in this space as many new projects keeps rolling out almost every day.
So liquidity risk is one of the risk traders and investors alike need to be familiar with before deciding to invest in this space for their own good.
Environmental Impact:
Many cryptocurrency who operate on the proof of work consensus mechanism have a problem with this and this environmental impact associated with their mining often impact the prices of this coin.
For instance we saw in 2021 around the end of the bull season altseason when China ban Bitcoin due to their environmental impact of Bitcoin mining on the environment ofcourse we know Bitcoin operate on proof of work consensus mechanism. Now when this happened it kick-started a rather volatile move to the downside in a manner many investors where not expecting and this caused many great financial loss as Bitcoin dump along with every other cryptocurrency in the crypto space, it was simply a blood bath.
So investing in proof of work consensus mechanism project which it's mining causes harm to the environment could lead to fewer persons investing or pulling out their money in cases of negative remarks out of fear which is one of the risk associated with cryptocurrency investment that we should be aware of.
Investment Speculation:
Well this one in particular is what almost everyone in this space knows, there has never ever been an asset class as volatile as cryptocurrency and most times moved merely by mere speculation that the cryptocurrency market I mean there are some project on solana that will just spike up to 10,000× in a minute only to dump the next and I wonder what's happening.
The cryptocurrency market is volatile and speculative and for this reason presents a great risk as you can be very rich and quickly become poor from this movements, true it can make one rich in an instant of time and also make you poor very quickly even much faster as it made you rich, so beware of the cryptocurrency market and know the dangers before investing your precious funds.
Conclusion
These risk I believe before it could be mitigated it needs to be know by every individuals because for most part it depends on you to make the investment choice as no one would push you and the choice is yours and yours alone so it's wise that we must act wisely to have a good financial future.
167.082 SRY