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Kucoin|what are the risks associated with investing in cryptocurrencies?

The dangers of bitcoin should not be overlooked. Before considering cryptocurrencies as a legitimate investment option alongside or instead of more traditional types of investing, you must educate yourself on the risks associated with them.

Cryptocurrencies have undeniably become a significant element of the financial sector, serving as a rising alternative to more traditional investment methods.

Bitcoin, Ethereum, and Ripple have become so popular that nearly a third (31%) of 18- to 24-year-olds would instead invest in the cryptocurrency market than a workplace or personal pension, according to a poll by NerdWallet. Over a quarter (26%) of young individuals say they are hesitant to save for a pension because they believe it is too risky.

Understanding the hazards associated with cryptocurrencies, on the other hand, is a crucial step to take before investing in such items.

The volatility of cryptocurrencies:

Even someone with no prior experience with cryptocurrencies is likely to be aware of their volatility.

Substantial price swings have become a common occurrence in the bitcoin cryptocurrency world. Bitcoin traded below £22,000 and above £48,000 during July and October 2021.

The long-term price performance of cryptocurrencies can be difficult to anticipate due to these boom and bust phases.

While this is true of any investment, the extent of the volatility observed in the cryptocurrency sector and the tendency for prices to move for spurious reasons – such as Elon Musk’s tweets – means you should be aware of how abrupt and quick crypto value losses may be.

Storage of cryptocurrencies:

When you buy cryptocurrencies, you take up a more significant share of the risk of storing your information than you would with other investments.

Your cryptocurrency will be stored in a digital wallet secured with a private key.

Due to the length of these private keys, you will also be issued a seed phrase, a  phrase that you can use to recover funds and access your wallet. Your cryptocurrency holdings will be lost forever if you forget or lose this phrase.

This means that investing in cryptocurrency risks human error, which is a big deal.

Regulation of cryptocurrencies:

Cryptocurrencies are currently mostly uncontrolled and decentralised (although if global governments have their way, this may change in the future). This is the most appealing aspect.

However, this leaves investors vulnerable to bitcoin scammers and without regulatory protection in the event of theft or hacking. Because of this and the potential for price volatility in crypto exchange, the Financial Conduct Authority (FCA) advises investors to expect to lose their entire investment.

Cryptocurrency’s environmental concerns:

While not as severe as the other risks outlined, the environmental impact of cryptocurrencies is likely the most crucial element to consider before investing.

Many cryptocurrencies’ minting processes are highly energy-intensive, whereas Bitcoin’s carbon footprint is comparable to entire countries.

Although the environmental impact may not directly affect you, at least for the time being, it is an inescapable consideration when deciding whether or not to invest in cryptocurrencies.

Conclusion:

KuCoin appears to be a good fit for experienced and active cryptocurrency traders at first glance. Hundreds of tokens are available on the market, and the option to trade futures contracts and employ margin. When you combine all of this with KuCoin’s low costs, it’s easy to see why it’s a popular cryptocurrency exchange.

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