What are the disadvantages of crypto assets (virtual currencies)? Explain four drawbacks and risks

While crypto assets have many advantages that cash transactions do not have, they also have the following disadvantages.

• 1. Prices fluctuate wildly
• 2. Immediate payment is difficult
• 3. Hacked or lost
• 4. Regulated by law

I will explain the four disadvantages in an easy-to-understand manner for beginners.

1. Prices are highly volatile

The biggest drawback is the volatility of prices.

When crypto assets are viewed as an investment target, their prices tend to fluctuate wildly and the range of fluctuations tends to be large.

Large price fluctuations mean that while profits can be expected, there is also the risk of losses at the same time. In particular, the risk is even greater in leveraged (margin) trading, which is often used in crypto assets and FX.

Read More: What are the advantages of crypto assets

If you are new to crypto assets, we recommend that you first invest in a small amount and get used to the fluctuating range of crypto assets.

2. Immediate payment is difficult

Immediate settlement of crypto assets is difficult.
Transactions with cryptocurrencies are completed and confirmed as transactions only after verifying that there are no mistakes in the transaction details and approval.

Therefore, there is a disadvantage in that it is difficult to make an “immediate settlement” like cash or credit card.

However, this problem can be avoided by using the wallet function that implements the payment system.

In recent years, there have also been moves by credit card companies to shorten the time it takes to send money abroad by partnering with crypto assets.

So, it can be said that the issue of settlement time is not a big obstacle.

3. Can be hacked or lost

Crypto assets are at risk of being stolen or lost, just like cash.

Crypto assets are often managed by apps called “wallets” installed on PCs and smartphones, but they can be hacked when connected to the Internet. There is also a way to avoid it and store data on offline hardware such as USB, but there is also a possibility of losing it.

None of these things happen very often, but you should understand that there are risks similar to “lost your wallet” or “spoofed”.

4. Regulated by law

Governments around the world are scrutinizing crypto-assets, and at the G20 Finance Ministers and Central Bank Governors Meeting in March 2018, it was concluded that crypto-assets should be monitored.

In addition, in China, which had the world’s highest trading volume of crypto assets until 2017, the government began to strongly restrict crypto asset trading in September 2017.

It is expected that laws and regulations will continue to change in the future for crypto assets, which have a short history.