What Are The Risks Surrounding Cryptocurrencies & NFTs?

Cryptocurrency and non-fungible tokens (NFTs) have entered the world’s mainstream in recent years, with both of the virtual assets having been embraced by much of the population across all corners of the planet.

Despite their emergence as big players, there is still a lot of confusion about what they actually are whilst many will not fully understand the risks that can be associated with each of them, despite perhaps being aware of the benefits that they can provide holders.

This article will take a look at the biggest risks that currently surround crypto and NFTs, thus aiming to provide you with all of the required information needed, should you decide to try and invest in them in the future.

What are cryptocurrency and NFTs?

Cryptocurrencies and NFTs are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Both are decentralized, thus making them rather appealing to those who wish to avoid regulatory actions from financial institutions such as banks.

Cryptocurrencies and NFTs are often used to purchase goods and services online. They can also be used to invest in other cryptocurrencies or assets. There have been a number of benefits to have been highlighted with each of them, with the use of blockchain technology perhaps a big one, however it seems the risks that are also possible do not get as much light shone on them; something this article will change.

An algorithmically-generated cartoon image of an ape, number 5809 in a set of 10,000 collectible non-fungible tokens (NFTs) called the Bored Ape Yacht Club, made by the U.S.-based company Yuga Labs, in this digital image, 2021. Mandatory credit Courtesy Sotheby?s /via REUTERS

What is risk?

We all know what risk is, as it is the potential of losing something of value. It is the possibility of a negative event occurring that will have an impact on an individual, group, or organization.

There are many types of risks that can affect an individual, group, or organization. Some of the most common risks include financial risks, health risks, and safety risks. Financial risks can include the loss of money or investments. Health risks can include the risk of illness or injury. Safety risks can include the risk of accidents or injuries.

Gambling is perhaps one of the biggest forms of risk many will immediately think of, as those who continue to wager in online sports betting with PayPal will know that they are risking a stake against the possibility of an outcome happening that is not guaranteed; investors who continue to bet on stocks and currency exchanges will also face the same level of risk, too.

Cryptocurrency and NFTs, though, have also become incredibly known for the risks that are involved, though, in recent years. Let’s explore some of them below:

Price volatility

Perhaps the biggest risk associated with digital assets is the price volatility that is continued to be experienced. Indeed, many will have heard at some point in the past that cryptos such as Bitcoin can be worth an incredible amount of money at one moment, but then hear that the price has crashed and plummeted to an incredibly low rate in comparison just moments after.

This is one of the biggest risks available because it is completely out of the control of everyone involved, and can be impacted by external influences and government decisions across the world.

Fakes

Unfortunately, like a lot of different things in the world, there are a number of scams going around that will provide people with fakes and replicas of the real thing. As these assets are continually bought over the internet and there is no physical aspect to them, it can be hard to identify if they fall into this category.

Scammers have managed to create fake platforms and exchanges in which they are sold, whilst there are a number who remain unverified or look to pose as the original artist in order to scam people in regard to the sale of an NFT.

External influences

As mentioned in regard to price volatility, there are a number of external influences that can have a serious impact on how well crypto and NFTs do in the immediate present or even the near future.

Continued changes to environmental factors such as countries looking to crack down on the carbon footprint that they leave on the planet, as well as evolving legislation, and the ever-changing evaluation of these digital assets will always leave risk attached to them.

Final Thoughts

Crypto and NFTs are extremely risky and it is vital anyone who is interested in them knows about what potential risks exist. They can be highly rewarding for those who invest in them, however there might not be anything in the world that is riskier.

About alastair walker 8772 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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