Virtual currencies have forever changed how we think about personal finance and doing business. Over the years, they have caused controversy, are criticized, generated crime, are accompanied by failures, and provide an opportunity to make good money. What threatens those who have chosen virtual currencies as an investment tool? These are defined as follows:
The first was created back in the days of the emergence of electronic payment systems (Web Money, QIWI, etc.). Now their analogs are adapted to the virtual currency market and can be triggered wherever such a possibility arises. The most common forms of stealing crypto coins are:
- Phishing (unauthorized access to personal information)
- Fake links (substitution)
Owners of digital money should be especially vigilant and try to stay one step ahead of malware – use reliable anti-virus protection, check all addresses, and not follow suspicious links.
Cyber-attacks are the second-largest problem and a frequent occurrence in the world of emerging virtual currencies. Incidents of hacker attacks are becoming more frequent, and fraud methods are becoming more sophisticated. Bitcoin wallets and large amounts circulating on trading floors have become especially attractive to thieves. Cryptocurrency exchanges have been repeatedly hacked, because of which many have closed due to bankruptcy.
Bankruptcy and closure of exchanges
Over the previous five years, about 48% of cryptocurrency exchanges were closed, among which there were quite promising ones.
“Of course, closing 48% of exchanges is inappropriate, but given that bitcoin is a relatively new technology, this is not surprising,” said Richard Johnson, vice president of Greenwich Associates.
At the same time as the closure of the sites, users did not have time to withdraw money from their accounts, which led to multimillion-dollar losses. And the reason for this was not always hacker attacks.
It is the main reason for the collapse and the pressing problem for most cryptocurrency exchanges. Many cannot provide sufficient turnover of funds to “stay afloat” for a long time.
Technical failures in operating areas where bitcoin wallets are stored are common. Investors who have suffered failures cannot claim a refund, whether the problem is caused by malicious hackers or operator negligence in software development.
The collapse of the virtual money market
No one can ensure the success and longevity of virtual currency. On the one hand, they are received on a par with fiat money, and on the other hand, they are not subject to any authority. They are not material, like the dollar or the euro, but there is a possibility that soon they can be withdrawn through an ATM and put in your pocket, like ordinary money.
Volatility = instability
You should single out this point separately. When there is such volatility, everyone begins advising on when to buy and sell. Of course, ideas can be good, but inexperienced market participants should step aside and wait so as not to fail everything. Digital coins can become a tool for generating high returns, but only in the hands of experienced investors.
Another point is decentralization. It is a benefit as well as a disadvantage. There is no authority; no one can hold the minimum value of the digital currency. If most investors determine to dump bitcoin and “throw” a lot of coins into the market, then there is a chance that the rate will collapse.
The virtual currency market is unstable as it is at the formation stage. It requires special knowledge and skills that are often incomprehensible to beginners. And while high volatility may seem like an attractive investment, there are numerous “gaps” in this brand-new area.
Initial Coin Offering (ICO)
Representatives of the British Financial Conduct Authority said that everyone who invests in ICOs should be prepared to lose their money since some of these schemes are directly related to fraud. But that’s where the similarities with IPOs end. They use the Initial Public Offering (IPO) method to raise money for Internet startups. The FCA has advised participants in this “speculative frenzy” to withdraw their investment.
Loss of the secret code
It is the permit key to the bitcoin wallet. The loss of the code implies the failure of all assets kept in the wallet. It can occur if the PC hard drive fails or the code written on the flash drive is harmed. According to statistics, this happens to 25% of crypto wallet owners who have lost about $18 billion. It is inconceivable to restore the code and return the money.
Invalid user transaction
An error when entering a code of just one digit or sending it to the wrong address also leads to losses. You cannot cancel the transaction, so the amount sent cannot be returned.
Let’s sum up this long list. Virtual currency is unstable, not regulated by anyone, does not guarantee investor protection, is subject to excessive volatility, and is excessively attractive to scammers. The possibilities for virtual earnings can be as light as the currency itself. Everyone who sponsors bitcoin or carries out transactions with cryptocurrencies must, first, take into notice the risks to take the required measures. Only an integrated approach will help to protect funds effectively.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.