Investing in cryptocurrencies is a risky and volatile investment. They are susceptible to security issues, bad publicity, unethical behavior, and market downturns.
Bad publicity
Among cryptocurrencies, the Decentralized Autonomous Organization’s (DAO) crypto got a lot of love and it’s no doubt that its tokens are a lot more than the average Joe’s piggy bank. However, it did not do so well as one would expect from the team that crafted it. Despite its acclaim, the crypto was a finicky beast. Its grand finale, the DAO, was a bit of a letdown and saw its first major meltdown in a matter of hours.
The aforementioned DAMO crypto was not the only fin to drop the crypto ball. The crypto has been plagued by high profile hacks and lawsuits. In a related story, the Decentralized Autonomous Organization (DAO) was found to be stoking the fire with a large portion of its aforementioned tokens. Despite its best efforts, the crypto juggernaut was unable to keep pace with the scalding heat.
Security issues
Despite the tremendous potential of cryptocurrencies, security issues are a common occurrence. The blockchain technology behind cryptocurrencies is vulnerable to attacks from hackers and adversaries. It is also difficult for experienced programmers to secure smart contracts.
Security vulnerabilities are a key reason why cryptocurrencies fail. These vulnerabilities can be exploited before patches are installed.
Cryptocurrency wallets are also vulnerable to hackers. If the wallet password is cracked, anyone can use it to access the holder’s funds. This can result in lost funds.
Hackers can also access wallets by reverse engineering passwords. This poses a significant risk to holders. They can also use weak spots in the code to divert cryptocurrencies.
The crypto ecosystem is still evolving, and more security shields are being developed. But many flaws will be outside the exchange’s ability to mitigate.
Unethical behavior
Despite the hype, cryptocurrencies have yet to take the top spot as the go to digital currency. There are more than a thousand cryptocurrencies on the market today, with the number expected to increase dramatically in the near future. Despite their many benefits, cryptocurrencies are not without their drawbacks. They are not always secure, are highly volatile and are not the most cost effective way to transfer funds. Moreover, most consumers do not have direct access to them.
The big question is how to properly regulate cryptocurrencies in a responsible fashion? This is not to say that cryptocurrencies should not be permitted at all. In fact, there are many cases where cryptocurrencies are used for legitimate purposes. One cryptic case is the emergence of crypto-financing schemes in developing nations. Another is the lack of an institutionalised regulatory process that allows for illicit activity.
Lack of application
Tidbits like the Osama bin Laden case may have sparked a crypto renaissance of its own, but the crypto world is still an enigma to say the least. In an effort to quell the flames, the CFDA has enlisted the services of former regulators to come up with a framework aimed at bringing stability to an industry that is anything but. The CFDA’s latest fintech initiative will kick off with a series of tech roundtables in Los Angeles and Seattle, with the next wave of activity in the works.
As the CFDA’s fintech initiative kicks off, the agency is looking to take the lead in redefining the fintech industry – and ensuring a steady flow of new innovations. The CFDA will also be looking to implement a new fintech scorecard to identify the best fintech startups and foster better collaboration amongst existing fintech startups.
Market downturn
Throughout its short lifespan, the crypto market has experienced a few major downdrafts. Several of them are causing serious concerns about the future of the industry.
The recent crypto market downturn is the latest sign of uncertainty in the sector. Several key players are struggling with debts and liquidity issues. Some of them are shutting down. The crypto industry has also become a target of new enforcement actions by the Securities and Exchange Commission (SEC).
The SEC is considering new rules that could make it more difficult to operate a crypto business. The recent downturn is also part of a broader pullback from risky assets. This is due to inflation, interest rate hikes, and economic uncertainty.
The crypto market has also been hit by a wave of funding stresses, including the collapse of a crypto lender, Celsius Network. The fiasco cost investors $40 billion. This has spread contagion across the sector.
