As a Financial adviser, I get asked many questions around cryptocurrency and what is my take on this.
Firstly, most people will invest in Cryptocurrency purely for the “hype”. When I sit down with some clients and review their tolerance to risk, they normally come out as a balanced……
Navigating the cryptocurrency realm requires skill & an understanding of the subtleties of the market; it also comes with significant risk.
From government regulations to security, I will look at some of the big problems facing cryptocurrencies.
Let's begin…..
Government regulation is inevitable
Government reactions to cryptocurrencies have ranged from aggressive to indifferent, with investors and speculators cautiously monitoring international developments. Just recently, Head of the International Monetary Fund, Christine Lagarde, stated that regulatory action from the international community on cryptocurrencies is "Invetible".
Christine also said:
"We are actively engaging in anti-money laundering and countering the financing of terrorism. And that reinforces our determination to work on those two directions."
There's an issue of inheritance
The unregulated nature of bitcoin means that without the keys needed to view a relative’s digital wallet, there’s no way of accessing their funds if they are to pass away.
For example:
Five years ago, Matthew Moody died during an observational flight, and at the time had been mining bitcoin. His father, Michael Moody, has spent the last three years trying to find out how many bitcoins his son has and how to find them.
However, without knowing every single address, he is unable to locate every piece of currency.
There's a security risk
Bitcoin exchanges are digital and therefore vulnerable to hackers, operational glitches, and malware.
By targeting and hacking a cryptocurrency exchange, hackers can gain access to thousands of accounts and digital wallets where the cryptocurrencies are stored.
One infamous example was the digital token inspired by the popular South Korean Netflix series Squid Game has lost almost all of its value as it was revealed to be an apparent scam.
Squid's developers have made off with an estimated $3.38m (£2.48m).
Money today, gone tomorrow…..
There's a market risk
As with any investment, the value of cryptocurrencies can fluctuate.
This should be no surprise.
Within their short time, they've seen fierce swings in value and extreme sensitivity to headlines, due to the high number of informal and amateur investors.
If there's continued resistance to the adoption of bitcoin and other cryptocurrencies, they may lose value.
Experts, investors, and budding traders will continue to speculate as to the future of cryptocurrencies. All we can know for sure is that it's going to be an interesting journey.
I am an Independent Financial and Mortgage Adviser and have worked in Financial Services for over 12 years. During my career I gained experience in assisting both individual and corporate clients.…
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