Risks of Crypto Investing

Summer of 2013, by buddy and I each invested a few grand into a friend's business. 4 years later, the business is gone, my friend never talks to me, and I received 0 return from my investment. (Yes, the idea of being a 'Shark' led to my demise).  Since that summer, one Bitcoin (BTC) has gone from $90 to over $19,000 (price during winter of 2017). That's a gain of over 211 times! In a 'what if' world, if our $5,000 was put into BTC, it would be worth over $1,000,000! Yes, ONE MILLION DOLLARS!

However, great rewards come with even greater risks. Be sure to conduct research before you invest in anything. And never invest money that you can't afford to lose.

If your heart rate sped up and you mind went to outer space when you read ONE MILLION DOLLARS, be sure to understand the risks of crypto investments and come back to Earth.

Risks of Crypto Investments:

1) If it's too good to be true, it usually is
The 211 times gain would only come to fruition under near perfect circumstances. You would need to buy at the lowest dip, sell at the highest peak, not lose access to your account, etc. Lastly, exchanging your crypto into fiat money (i.e., USD$) is subject to substantial taxes. (An income of $1,000,000 minus taxes becomes a take home value of about $665,000).

2) Unsafe Storage
Storing cryptocurrency on an exchange is not safe. An exchange is to exchange currencies... not store them for the long term. Look up what happened at the Bitcoin exchange, Mt. Gox, in 2014. All BTC sitting on the exchange was stolen! More recently, the exchange, Youbit, was hacked and all currency stored on the exchange was stolen! Also, moving crypto off an exchange brings other concerns such as human error of losing access to your account (i.e., forgetting password, where you stored your crypto wallet) and hackers or malware that steal your currency.

3) High Volatility
From December 17 to 22 (2017), BTC went from over $19,000 to under $12,000 (that's almost a lost of 60%). Imagine if you were the unlucky fellow that bought BTC at $19,500 and woke up to BTC in the $11,000s. There's a chance that over a span of a week, big name companies announce that they will not accept BTC, governments ban crypto, and big investors sell all of their BTC! (All of these incidents and many others will cause a drop in cryptocurrency's value).  Although the chances of these events occurring in a week may be slim, BTC's value is very volatile and could drop to triple digits in the future.

- BTC was in the $8,000s on Black Friday 2017, then reached $19,000 three weeks later. Shortly after, BTC plummeted to sub-$12,000 days before Christmas - 

(image from coinmarketcap.com)

Conclusion
There are many other risks than the three mentioned above. If you perform intensive research and stay up to date on your investments, you'll improve your chances of crypto success. However, one day of bad luck could turn your crypto portfolio into pennies or even worth nothing if stolen! Never invest money that you can't afford to lose. Be sure that you are maxing out your retirement saving accounts, have a good sized emergency fund, and pay your bills before you explore risky investment options such as crypto.

If you'd like to learn more, come and join the picnic!

**This is not financial or investment advice. Be sure to conduct additional research and never invest with money you can't afford to lose.**