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Sunday, 10 December 16:07 (GMT -05:00)

Foreign exchange market

What Threats Do Cryptocurrencies Bring to Users and Investors?

Anonymous cryptocurrencies are said to simplify many financial transactions. Those who advocate digital currencies claim that they are very easy to use, even though this is a rather disputable statement, Market Leader reports.




On the surface, cryptocurrencies resemble plain text files. The very process of transferring digital currencies is as easy as sending an e-mail. The owners of digital currencies can transfer the money directly to each other, without having to address banks or other third parties. Basically, the only thing you need to know to transfer funds is the e-wallet number. The person’s credentials are option.
Once again, most cryptocurrencies out there are anonymous. For now, Bitcoin makes up for roughly 40% of the cryptocurrency market capitalization. This is not accidental given the fact that Bitcoin is the first and most popular cryptocurrency in the world. Basically, anonymity is one of the key reason why Bitcoin has been so popular worldwide.
The total market capitalization of the entire global market of cryptocurrencies is around 138 billion dollars. Even though digital currencies have been increasingly popular, experts recommend against making hasty investment decisions and take into account all the risks related to buying, hold and selling those currencies online.
When it comes to cryptocurrencies, there are no single and stable exchange rates, which means that those currencies are still rather volatile compared to conventional currencies we all know. The exchange rates of Bitcoin and its peers have been some kind of a roller coaster ever since they came into existence. Some people try to trade those changes to try and make quick cash. They want to buy low and sell high. However, such transactions may take a while, and in reality the exchange rates may change a couple of times while they are processed and completed. That’s why trading cryptocurrency is rather risky.
Cryptocurrencies are decentralized. There is no single bank to control them. Their exchange rate is basically backed by people’s trust. After a hack attack on major Bitcoin exchanges in July 2017, the BTC exchange rate instantly dropped from $2600 to $1900. Even though the hackers managed to hack a related system, not Bitcoin itself, the trust was undermined, which was instantly reflected in the exchange rate.
Some observers claim that cryptocurrencies get more expensive when they get more attention from the international community. On the contrary, when people lose interest in them, they may lose value as fast as they gain it. Fully functional cryptocurrencies emerged in 2009. This year, Bitcoin has split in half – Bitcoin and Bitcoin Cash. The thing is, the system is used by too many people while the capacity is 7 transactions a second. For the sake of comparison, Visa and Mastercard can handle 2000 transactions a second. Ethereum also split in half after a major hack attack.
At the same time, some experts say that if the system gets more complex, this may result in higher system requirements for miner to back higher processing power. This means that only big-scale miners will manage to survive further down the road.
According to Nobel Prize Winner Robert Shiller, Bitcoin is the best example of a speculative bubble. This is what he stated during his interview to Quartz, a recourse specializing in IT and business. According to him, price bubbles emerge when too many market participants invest too much money in a relatively small amount of assets. As a result, the assets get overpriced.
Students of financial colleges and universities are often told the same story. They say that in 1928, right before the Great Depression in the USA, a major banker learned from a shoe-shine boy a reason to sell the stock of a railway company. Later on, the banker sold the stock, and the company went bankrupt soon. The banker came to the conclusion that when even a shoe-shine boy can buy a stock, such a stock should be get rid of as soon as possible.  
Anonymity is not always good


Cryptocurrencies have been popular with hackers, drug dealers and other criminals. Anonymous cryptocurrencies make it impossible to track those transactions or get the money back. Even if the user loses a secret code to access the e-wallet, the system won’t let them restore it. At the same time, new technologies are often hacked. Because of various vulnerabilities in the operating system, the e-wallet can be stolen anytime. At the same time, hackers keep on coming up with new ways to mine cryptocurrencies. Kaspersky Lab warn us about mining viruses that have already infected around 9000 PCs. Those viruses secretly utilize the victim’s PC processing power to mine cryptocurrencies, which is why the infected computers get slower and consumer more electricity. So, be careful and make sure your computer is secure.


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