Problems and risks of Cryptocurrencies

Risks in cryptoworld are presented in various forms, let’s have a look at what are the risks in cryptocurrency and why is cryptocurrency high risk?

Cryptocurrencies risks and problems

Problems and risks of Cryptocurrencies

When it comes to the topics associated with cryptocurrencies, one thing we cannot overlook are “risks”. Risks in cryptoworld are presented in various forms, let’s have a look at what are the risks in cryptocurrency and why is cryptocurrency high risk?

Rug pulls:

This simply refers to an action that the development team of a project suddenly abandons or remove its liquidity of the project leaving the associated tokens with no value

Scam projects:

As there are a lot of good and reliable projects in cryptoworld, there are also various fake or scam projects in the other hand. Scam projects fake themselves as official projects and often trick gullible victims through phishing activities

Taxation of tokens:

Some tokens are associated with tax. When trading, traders are bound to pay tax incurred on these tokens without even realizing the fact. Be advised to do some research about each particular token before trading

Market risks and volatility:

Cryptocurrencies are highly volatile, comparing to the stock market, there is no circuit breaker to stop the crashing of the market. In case the prices of cryptocurrencies keep falling, there is no mechanism to stop the panicked traders to sell their tokens which then aggravates the fall

Moreover, in addition of these risks, let’s have a look at what are the disadvantages of cryptocurrencies.

First and foremost, gas fee is a huge drawback of cryptocurrency in many blockchain networks. Not only it charges to traders at every transaction made, sometimes uncontrollably, it also consumes a huge deal of electricity which greatly magnifies the world’s emission of CO2. And while the transactions are being made globally too many times, the transaction nodes will be burdened too heavily which causes a lag to trading.

Secondly, cryptoworld imposes a huge entry barrier to newcomers. It’s fairly hard to newcomers to understand the basic mechanisms and how does it work without help from a veteran. Without this knowledge, beginners are more likely to make mistakes which can cost a fortune.