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, November 14, 2018

Proceed with Caution: Cryptocurrency Is Riddled With Risks

by XPS Staff 

There are all kinds of news (articles and videos) about digital currencies on traditional and social media, and it’s easy to be confused by it all. In fact, you may be left wondering if cryptocurrency in something you should be investing in.

A Look At Cryptocurrency

Cryptocurrency (crypto, for short) is one kind of digital currency are different from fiat currencies (dollar, yen or euro). They’re not represented by physical money but rather a unique alphanumeric line of computer code. 

A central bank does not issue cryptocurrencies but is technology-controlled. The technology regulates the amount of units generated, and the way transactions get recorded.  Most people have heard of Bitcoin, as it was one of the earliest cryptocurrencies to debut. Today, there are over 1,000 cryptocurrencies available. 

According to the U.S. government tax code, cryptocurrency is property; selling or exchanging cryptocurrency could have tax implications. 

What Are The Risks With Cryptocurrencies?

There are several risks with cryptocurrencies

  • Cryptocurrency platforms may be hacked, where customers can lose their money.
  • Once a payment has been made, it’s not reversible.
  • Although crypto can be spent or traded, it’s not legal tender, and no company has to accept it as a type of payment. Thus, cryptocurrency may have no value to it.

Cryptocurrency is a risk, and if you invest in it, it should be only for an amount you can afford to lose.  You can invest in cryptocurrencies in various ways – buying coins that could increase in value or purchasing platform shares or companies that help with blockchain technology. 

Investments can be made via Initial Coin Offering (ICO), which is how a company can raise money that includes the production and sale of digital coins. Investors often buy these coins to trade them for fiat or crypto-currencies. 

Be mindful of fraud, which has happened with direct currency buys and ICO. 

What To Remember 

Although cryptocurrency can be a wise investment for financial markets and capital raising, investors may have a hard time making a smart decision because of the lack of verifiable information.

Cryptocurrency markets are extremely volatile and are riddled with fraud potential.  People invest in cryptocurrencies because it’s an easy way to make money, but they can also lose it just as fast. 

Be wary of any site that offers guarantees, complicated strategies, account inconsistencies, missing documents, aggressive salespeople, unregistered products and dubious claims of regular returns.