Last Updated on November 26, 2018
For years, people have been investing in the stock market witnessing and experiencing ups and downs, highs and lows. But along comes another digital intangible investment opportunity known as the cryptocurrency, which is significantly attracting the interests of investors towards its direction, due to which the market is beginning to shift.
It is a popular perspective that the world is moving towards a digital future which is why investing in a trending digital currency seems logical. But in reality, it’s not as simple, because the digital currencies possess the following potential issues:
They are Extremely Volatile
Investing in digital currencies involves a very high risk, as the prices have been exceptionally volatile.
According to an Indian expert Vivek Belgavi, there is not enough of an ecosystem that surrounds digital currency to be able to allow fundamental analysts to research and study it as an investment. Therefore, people are investing with a lack of information while joining the herd of speculators.
Since the prices of cryptocurrency are not regulated, you can never be sure of where things will go in the future. This may lead to the formation of a giant bubble that eventually will burst and cause widespread panic and losses.
Cryptos have many critics, including JP Morgan and many governments as well, including China that seems to be against the concept of digital currencies.
Now, it does not mean that stocks are not volatile at all. They are volatile as well, but still predictable as there is years of data that can be used to predict the next market move, a luxury not available in case of cryptos.
An Unregulated Space
Unlike stocks, these digital currencies are not regulated by banks or government entities. Therefore, there is no security or backing.
Plus, there are scams as well. So many IPOs have been proven to be scams. Whereas, in case of stocks, all information on a publicly traded company is easily available, which means the risk of you getting scammed is little to none.
No one knows when there will be regulations in the cryptos world, but until that happens, one should stay away from it.
High Probability of Fraud
Besides the operational problems of trading in digital currencies, there is also a very high risk of Ponzi schemes. Still, there is a great deal of lack of clarity and misinformation regarding cryptocurrency trading, which provides fraudsters a chance to rob people.
There have been cases of people selling physical coins to buyers in the name of Bitcoin, simply because buyers are not aware of the concept of Blockchain or the fact that such coins do not exist in physical shape.
There are also frauds in case of shares, but the risk is lower and you have the option to find information before signing up on anything.
Check out pages like Investors Hangout and you will see how thousands of people are regretting having invested in cryptos, which seems to have taken a hit with the BitCoin prices having fallen from a high of $19,000 to $10,000 in three weeks.
Cryptos do have a future, but not until things are regulated. For now, stocks seem to be a better pick.