Reasons Why Investing in Cryptocurrency is Not Recommended

Let me explain the reasons why investing in cryptocurrency is not advisable.

1. Inability to Create Value and Unpredictability

Cryptocurrencies do not create value. Many of the cryptocurrencies that claim to create value turn out to be scams, and attempts to create value often lead to a decline in price and eventual delisting. Additionally, the energy consumption required to maintain and secure cryptocurrencies is extremely high. The current value of cryptocurrencies is driven by human greed, speculation, and fraud, rather than any inherent value creation.

Moreover, cryptocurrency price movements are highly unpredictable. Stocks can be somewhat predicted based on global information since they create value, but predicting the movement of cryptocurrencies is nearly impossible. Cryptocurrencies sometimes decouple or couple with other markets, founders may sell their holdings or manipulate supply, and certain groups can influence prices, making any predictions meaningless.

2. The Illusion of Decentralization, Privacy Concerns, and False Security

While the original creator of bitcoin didn't explicitly claim decentralization, many interpret it as such. However, true decentralization is impossible, as someone must constantly manage, maintain, and secure the cryptocurrency network. Essentially, the roles currently performed by banks or governments must be taken over by private entities. This introduces numerous problems, including costs, security issues, and privacy violations since transactions are publicly visible. Even just considering the use of cryptocurrencies in criminal activities reveals the emptiness and lack of value in what they aim to achieve.

3. Volatility and Unsuitability as a Currency

The cryptocurrency market is extremely volatile. Prices can skyrocket or plummet quickly, offering opportunities for significant short-term profits, but also posing substantial risks of large losses. This volatility is difficult to predict and can cause considerable stress for investors. High volatility also makes cryptocurrencies unsuitable as a currency. For example, Bitcoin's reduced supply and subsequent price increase demonstrate that cryptocurrencies are not suitable as functional currencies.

4. Regulatory Uncertainty

Cryptocurrencies are a relatively new asset class, and the regulatory environment is not yet fully established. Sudden changes or tightening of government regulations could have a significant impact on the cryptocurrency market. For example, some countries may ban or restrict cryptocurrency trading, which would pose a considerable risk to investors.

5. Risk of Fraud and Security Breaches

The cryptocurrency market is fraught with risks of fraud and hacking. If a cryptocurrency exchange or wallet is hacked, investors may lose their funds, often with little or no recourse for recovery. Additionally, scams related to cryptocurrencies are frequent, making it easy for investors to fall victim if they are not cautious.

6. Low trading volumes and Liquidity

Some cryptocurrencies suffer from low trading volumes, leading to liquidity issues. This can make it difficult for investors to sell their assets at the desired time, potentially resulting in sales at lower prices than expected. Liquidity problems can cause significant losses for investors, especially during market downturns.

7. Uncertain Future

Cryptocurrencies are still in their early stages, and it is difficult to predict how they will evolve. Some cryptocurrencies may disappear or drastically lose value, while new ones could emerge and change the market landscape. This uncertainty about the future makes long-term investment challenging.

Conclusion

Investing in cryptocurrencies carries the risk of significant value loss along with the potential for high, random returns. Both domestic and international exchanges are trying to attract people to make money off transaction fees. The potential profits are significant, but it is better to invest in stocks or keep your money in a first-tier bank.