Let’s treat cryptocurrency as a normal stock, trading in an exchange…What factor makes the prices of the stock go up and down? There’s just one- Demand & Supply. If a stock is in Demand that is the number of people with positive sentiments (interested in buying) is more than the number of people with negative sentiments (interested in selling) so obviously you always wanna sell high so the sellers start increasing the price and because demand is high the prices continuously get filled and are raised even more.

Now coming to Cryptocurrencies:

1: The fundamental flaw in cryptocurrencies is that it has no Intrinsic Value which means if crypto goes down you will be left with zero value.

2: There is no such things unhackable-if your virtual currency in the private wallet get stolen or worse wallet shut down all your money all you money is gone whereas banks are regulated and are guarantors of your money.

Risk involved in trading cryptocurrencies!

3: There is high level of uncertainty whether govt will accept it or not. Even Countries like china are cramping down on miners and other service providers which put the future of the crypto investors in peril.

4: Like when you’re investing in stock one is available with ample of information about the project, venture etc. in which they’re investing but in crypto you have zero information where your money is going.

5: As I already mentioned that governments are not ready to accept cryptocurrencies in any form which means there is no forum left for you to raised grievances in case of any fraud.

6: The crypto market is known to witness high levels of volatility, making it a risky proposition. An investor stands to lose hefty sums of money if the price of a token suddenly drops. The extreme ups and downs can’t be handled by many investors.

Don’t invest in cryptocurrencies. Trade it.

*****

Disclaimer: Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite.  TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. . By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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One Comment

  1. Subramanian IP says:

    Sir,
    Thanks for this article explaining the risks. FATF clearly stated in its 111 pages booklet specific guidance for countries/ jurisdictions to mitigate risks of virtual asset, a broader concept. Again thanks for your innovative article.

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