There is a big hype over cryptocurrencies that is growing in recent years. For many people, it is a popular topic even if they still don’t own any crypto. A lot of them are interested in starting to invest in this market. The main reason is that it offers a great chance to make a profit. However, you need to keep in mind that there is a lot to learn about cryptocurrencies before you start trading.
When it comes to investors, the main reason why they are attracted to this market so much is the high fluctuation of prices. You can choose to buy and hold or to deal with day trades, and both choices can help you to make a steady income. However, it is essential to determine the best time for taking any actions. Only with a good strategy, you can manage to make cryptocurrency trading profitable.
Besides those who are interested in investing and who are constantly promoting blockchain systems as the future of the global economy, there are still many people who are more suspicious about the future of this market, and how it can affect the economy. For example, the most recent discussion is related to the impact on the environment of mining. A lot of people assume that it will become even more important over time since mining requires increased consumption of electricity. You can read more about that at blueandgreentomorrow.com.
Also, there are other concerns. We can find many analyses that say how investing in cryptocurrencies can provide you with a huge profit, and how it is a matter of time when all countries will accept this system and integrate it into standard financial flows. However, the situation is much more complex, and there might be some risks to the global use of cryptocurrencies. We are going to analyze more on this topic in the following article.
It Is A Risky Market
The most important thing that everyone should know about investing and trading with cryptocurrencies is that it is much more complex than some people are assuming or promoting it to be. While high volatility is one of the main reasons for high popularity, it also brings an increased risk of facing losses. It might not mean so much for the big financial markets, but it can lead individuals to face serious losses or even bankruptcy due to reckless moves and lack of strategy.
How It Can Threat Global Economy?
We can notice that some governments and big financial centers already stated their concerns over this market. For example, the head of the US Federal Reserve’s said that the technical background is still a big risk for digital currencies to become a widely-used payment option. Others are talking about this market being a potential bubble that might start losing its value at some point, leading many people to serious financial issues.
Also, some find it a serious issue that most of the cryptocurrencies are decentralized, which means that governments don’t have any control over them. Also, the problem can be the fact that the background is unclear. Most of the fiat currencies have a background in gold, standard, GDP, and other factors. Therefore, some financial experts think that blockchain currencies are factitiously provided with values.
Moreover, there is a lack of stability because of the wide range of factors that are affecting frequent changes in values. Also, there is the impact of large investors. The best example is Elon Musk. It is clear how his actions have affected the value of Bitcoin, which then influenced most other cryptos to change as well. He first stated that he invests a large amount of money and that his companies will start accepting BTC, which resulted in a huge increase in price and a new peak value of over $60,000.
However, later he started to talk about the impact of mining on the environment, and that he will withdraw the previous decision to accept BTC in his companies. That resulted in a serious drop over a short time. There is more to that since Elon again started to praise this market recently, which influenced another increase in values.
Connection With Criminal Activities
Another serious issue is related to the fact that the technology behind cryptocurrencies guarantees complete anonymity. While many people see that as an advantage, the problem is that criminals can use that feature to hide their activities. It is known that digital currencies are now used on a black market, and there were some websites like Silk Road, where people could order drugs or be part of various criminal acts by paying for suspicious services with an e-wallet.
The lack of transparency is one of the biggest issues for governments that cannot track these transactions. Even with new regulations where tracking these systems might become possible, there are currently over 3,000 different cryptocurrencies available, and it would be difficult to track all of these systems.
There is an increased risk of scams as well. With advanced security and privacy, there is no way to track where you are sending your money, which means that you cannot request a refund. Some popular crypto exchanges came up with a solution that will make using e-wallets less private, and that is to require the users to open accounts and leave their personal information before making any transactions. This might resolve some challenges.
The Bottom Line
Countries need to create new laws that will regulate this market. However, lack of transparency remains the main challenge. Even though there are tax regulations in many countries already, people could still easily avoid them by not converting their crypto to known online services.
Also, there is a big concern over the impact of mining on the environment. It is essential to use renewable energy sources to make this process less harmful to the planet. However, many countries lack modern solutions and are still using coal other harmful processes to create electricity.
In the end, while there are indeed many challenged related to this market. It seems that a continual increase in popularity and acceptance of this advanced form of money is inevitable. Therefore, countries and financial institutions will have to find the best way to effectively integrate it and resolve potential issues that it might have on both economy and the environment.