4 Risks of Using Cryptocurrency
The past couple of decades have seen continual advancements in technology. These advancements have made it possible to improve many other areas of our lives and culture.
Communications, health care, and business management have all been enhanced with new and better technology. Therefore, it was only a matter of time before technological improvements inspired the idea of a better currency.
But just because there’s a new currency out there it does not mean it’s infallible. Although it’s designed to be more secure through encryption, there are still risks of using cryptocurrency.
1. Instability of Values
Using cryptocurrency such as Bitcoin to purchase goods and services carries with it a certain amount of risk. Since its inception, it has gone from zero to nearly $20,000 for a single Bitcoin in December 2017.
However, the current value, as this post is written, places it at around $6K per Bitcoin. That is a marked decrease from the high it experience just six months ago. According to a recent post from Business Insider, the value of Bitcoin may continue to drop.
Still, this is not the first time such extreme changes in price have happened. But the problem is that these wild changes in value increase the risks of using cryptocurrency.
If you’re using it to purchase something expensive, what if the price drops before you close the deal? You may have to fork over more cryptocurrency than you were expecting. Furthermore, if values rally and rise later it could leave you with buyer’s remorse and huge losses.
2. Lack of Acceptance
A lack of acceptance is another of the risks you face when you use cryptocurrency. There are at least a couple of reasons for this.
Some businesses fear cryptocurrency due to the changes in value it has experienced. This makes them reluctant to accept it as a form of payment. If you try to pay for purchases strictly with cryptocurrency you could end up out of luck with some businesses.
Additionally, cryptocurrency is not classified in the U.S. as legal tender. This fact alone causes some people and businesses to fear it, mistrust it, and not accept it.
It appears that some foreign countries also have a lack of acceptance. Not all of them recognize digital currency as a form of payment either. If you’re making a complicated foreign purchase, this fact could make it even messier to complete.
3. Transaction Errors
It’s unfortunate that as humans we do make mistakes. We transpose numbers, record them wrong, and make other errors that are sometimes caught – and sometimes not.
What if an exchange is taking place and the wrong wallet address is entered? You could lose thousands if not tens of thousands or more.
Clearly, protecting your cryptocurrency is extremely important. Fortunately, there are ways you can reduce the likelihood of some errors.
Even with encryption to protect cryptocurrency transactions there have been hacks resulting in substantial losses. This is another of the risks of using cryptocurrency.
Passwords can be stolen or hacked. Hardware can be corrupted or taken. Others you do business with could be lax in their security. This could result in losses to your cryptocurrency during a transaction.
There are a number of ways thieves can gain access to your digital currency. As a result, it heightens the risks of using cryptocurrency.
Clearly, as a new form of currency, it still has some kinks to work through. However, it is possible to minimize some of the risks of using cryptocurrency if proper precautions are taken.