5 Reasons To Be Cautious About Making Money From Cryptocurrency

Feb 12, 2021 | Lifestyle

You’re all looking for ways to start up a little side hustle and make some extra money. It’s a good way to approach life, as you can never have too many income sources. In the last decade or so, there have been lots of new things introduced to the world to help people make money. One of the hottest topics is cryptocurrency. It experienced a boom a few years back, with loads of people earning a fortune – and some lucky investors becoming millionaires. Things calmed down, but now cryptocurrency is back in the news almost every day. 

If you listen to the self-titled experts on social media, you’ll believe that crypto is where the money’s at. Top celebrities are endorsing it as well, making most of us feel like we’re missing out. You may be keen to get involved, but it’s unwise to jump into any investments just yet. Most of the talk around cryptocurrency is positive, so let’s balance the scales by seeing a few reasons you might want to think twice about trying to make money from crypto investments:

1.  Safety risks

Perhaps the biggest problem with the crypto market is that it is nowhere near as safe as other markets. When you buy stocks and shares or Forex, your assets are pretty much as safe as can be. You can feel safe in the knowledge that it’s extremely rare for an investment account on these platforms to be hacked. By contrast, the cryptocurrency market is known to be unsafe. Hacks happen all the time, and many people don’t trust the exchanges to protect their assets. 

You’ve also got all kinds of weird things surrounding cryptocurrency regulations. Take another market, like Forex, and you’ll see it has crazy tight regulations on all brokers. If you download a Forex Android app, you know you’re dealing with a broker that’s regulated and follows all the security rules, etc. With cryptocurrency, there’s never really a guarantee that you’re dealing with legitimate people, so scams are very common. All in all, this creates safety risks for people like you that just want to make money!

2. Hard to value cryptocurrencies

Another issue with investing in crypto is that it’s notoriously hard to assign value to it. Now, this may be confusing as surely the value is the figure it’s worth? That’s true, but how do you predict if the value will go up or down? Look at people who make loads of money on the stock market – what makes them pick out the best investments? It’s all to do with watching the news, checking the financial information and sales of certain companies, and so on. You can gain plenty of evidence that suggests a company may start making more money and rise in value, meaning you can make a logical investment. 

With crypto, there’s hardly anything that lets you decide what to invest in. Usually, it’s all to do with following the crowd or making some guesses. Yes, there’s the total circulating token supply, but this doesn’t tell you much at all. It’s an incredibly difficult market to read, which isn’t something you want if you aim to make money.

3.  It Makes Taxes Even More Annoying

What’s the worst part of making money? Having to calculate how much of your hard-earned cash is paid back to the government every year. Taxes are necessary, but that doesn’t mean we have to enjoy paying them! It’s such an irritating process to go through, and cryptocurrency investments make it even worse. 

It’s all to do with the fact that your cryptocurrency can change in value, and then you can also use it to buy things – it’s all so confusing. Basically, you have to do all sorts of calculations to work out how much tax you have to pay because you made money through crypto. What does this mean? Usually, it means you have to hire an accountant worthy of dissecting this information, which just costs more money!

4.  The Market Can Be So Volatile

Crypto is probably the worst market right now in terms of insane volatility. A bit of volatility can be good, as you can then start trading and making money quickly. It’s still a challenge, but this is how the richest investors make money. Nevertheless, cryptocurrency has a tendency to go from massive highs to extreme lows. This year alone, the likes of Bitcoin have already exceeded their highest ever price, and then dropped down considerably. 

Therefore, it takes a lot of patience and willpower to hold onto your assets when you see a decline happening. What if this is finally the one that kills crypto? What if you end up with nothing? This big risk always hangs over the market, and it’s probably down to the final point…

5.  It’s Based On An Assumption

The whole cryptocurrency craze is quite insane considering it’s based on an assumption. It’s assumed that businesses and governments will start using cryptocurrency as a legitimate way of paying for things. Indeed, some online companies do have options to pay using Bitcoin or Etherum. However, what if this just never happens? What if they can never get the technology right to make this safe and regulate it?

In which case, surely the value of cryptocurrency will just plummet? Why would people bother investing in something that has no real use? This is what scares a lot of people; we’re all assuming that cryptocurrency is the future, but what if it isn’t? Decades ago, we thought we’d have flying cars, hoverboards, and clean energy by now! So, who knows what the future holds?!

To conclude, you should be cautious about the cryptocurrency hype. There are advantages to these investments, and you can figure them out in your own time. Many people have made a fortune by trading in these digital assets, but that doesn’t mean success is guaranteed. As with all methods of investing, if you want to make money, you need to start by learning about what you’re investing in. Understand the basics, know what you’re getting in to, and then decide if you want to attempt making money.

best,

– a contributed post

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