In 2021 Bitcoin was at its lifetime high price, in 2022 bitcoin price crashed like anything. Now imagine if some one who has enthusiastically invested in 2021 must have faced the disappointment and also loose a lot of money. That's how much volatile is crypto market is. And not only price fluctuations, there are several other factors which clearly indicates that crypto is never a safe investment option. I have explained a few below.
Cryptocurrency is unregulated
Cryptocurrencies are not regulated by any financial institutions or regulatory organization. Due to which it is highly prone to risk. For normal currency if you do any transaction you can reach out to bank any time if any discrepancy occurs. But same can not done with Bitcoin or any other crypto coins.
Cryptocurrency is highly volatile
Crypto prices has been fluctuated drastically in the past. As in the start of this article I have given the example of how bitcoin prices has been dropped from 2021 to 2022 drastically. People just buy and sell cryptocurrencies on the basis of random speculations. Also there are so many stupid Facebook and Telegram groups where crypto tips has been shared by some 15 years old kids. The information circulated in these groups can not be trusted.
Cryptocurrency is not a legal tender
Indian Government has yet not legalize the trading of crypto currency. Also neither RBI accept or approve cryptocurrency. All this means that if you do trading in crypto, you are doing it at your own risk. Where as if you do transaction in a legal currency such as Indian rupees, RBI provides you financial security in case any fraud happens to you.
Cryptocurrency Don't have a physical Equivalent
Cryptocurrency is virtual. This is only a computer code. You can not hold cryptocurrency in your hand like rupee notes. Which means there is no physical asset that you can claim bitcoin for. You can claim your money from RBI using bank notes, bonds and certificates. But this can not be done with crypto. This leads to further insecurity. As there is no physical backup for crypto.
Cryptocurrency is at a higher risk of cyber attack
As discussed above that cryptocurrency are only computer codes which are stored on an unknown server you don't know, so they are at much higher risk of cyber attacks. Suppose you have 5 lakhs worth coins in your crypto wallet and one fine day some hacker group hacks your wallet and transfer all the crypto coins in their account. Yes this can happen any time with crypto.
Investment Advisors take on Cryptocurrency
Not even a single famous investment Advisor recommend investment in crypto. In fact some of them compared it with Ponzi Schemes. Famous Investor Warren Buffet said that you should not invest in any asset which you can not understand. This is applicable to crypto.
Final Thoughts
According to me you should try other safer investment options than cryptocurrency. But if you still want to try crypto, then you should do it extra carefully. I mean, you should invest only that money in crypto which you have in surplus. Surplus money means the amount remained after your monthly expenses, some savings and necessary investments. For example if you earn 1 lakh and you spend 50k on expense, 20k savings, 25k in investments like mutual funds etc. Then you have 5k remaining which you can gamble in crypto. The logic behind this surplus amount investment is that in case you loose all of your crypto, your financial planning will not affected much.
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