Why Cryptocurrency is Not For the Faint-Head
The cryptocurrency industry has had a roller-coaster year. The rise of non-fungible tokens, the rise of less-known cryptocurrencies, and the rise and fall of the value of Bitcoin have all made it difficult to make predictions. Listed below are some of the key issues that make cryptocurrency not for the faint-hearted.
Regulation of cryptocurrency will normalise its use in financial services
While the potential for cryptocurrency’s use in financial services is huge, it is also fraught with risks. The potential for illicit activities is one major concern. Regulation should address this issue, as well as safeguard consumers and vulnerable customers from fraud and abuse. It should also focus on the safety and integrity of markets and payment systems.
Although regulation of cryptocurrency is still in the early stages, the industry needs to be prepared. It will allow it to grow and attract a wider customer base. It is essential for banks to update their internal systems and processes to meet the new requirements. The upcoming regulation of cryptocurrency is a critical step in the evolution of financial services.
There are numerous challenges facing the crypto community, especially in policy circles. It faces a generational gap. Today’s markets and economies are governed by fearful Boomers. And the crypto community is dominated by bitcoin maximalists. But, there are also insightful voices providing valuable perspective and challenging conventional wisdom.
The growing public awareness of cryptocurrency is another challenge for regulators. According to Pew Research, a nonpartisan think tank in Washington, one-fifth of U.S. citizens have used, invested, or traded in a cryptocurrency. Similarly, a study by New York Digital Investment Group suggests that 46 million Americans currently own cryptocurrency, which is 14% of the total population.
Market instability
Cryptocurrency has grown in popularity and monetary value over the past year, but investing in cryptocurrencies is not for the faint-hearted. The risks are high, and investors are often misled about the risks and rewards of cryptocurrency. The industry has been characterized by booms and busts. Many investors are losing confidence in the sector. There are also many tax implications to consider when investing in cryptocurrencies.
Instability: It’s important to understand that cryptocurrency prices can fluctuate wildly. This element of unpredictability can be a turn-off for the faint-hearted, and this is why it is important to balance the risks of various investment vehicles. An investor should keep in mind that they must hold onto their investment for the long term.
Uncertainty: The uncertainty in the US economy, lingering Covid pandemic, and Russian invasion of Ukraine have all contributed to the market’s decline. Additionally, China’s crackdown on crypto services has put investors on edge. Although big swings are expected in a new industry, short-term investors should be wary of these fluctuations. This can lead to panic selling. As such, cryptocurrency is not for the faint-hearted.
Millennials and Gen Z investors
The volatility of cryptocurrency is a major deterrent for millennials and Gen Z investors. The younger generation feels uncertain about the future, and their generation has taken on 300% more student debt than their parents. Additionally, the cost of living has increased dramatically. While millennials are known as risk-takers, Gen Zs are much more conservative.
A recent study showed that half of US Millennials and Gen Z investors want to invest in cryptocurrencies through their 401(k) plans. These plans are commonly offered by employers to employees. According to Charles Schwab, 54% of Millennials and 47% of Gen Z investors said they would like to invest in cryptocurrencies.
Millennials and Gen Z investors should avoid investing in cryptocurrency because they aren’t ready for the risks associated with the currency. The underlying premise of cryptocurrencies is that investors can own a digital image, or “non-fungible tokens.” This allows Gen Z and Millennials to buy digital images, like art, without having to pay for them.
According to Bankrate’s study, the percentage of millennials who are comfortable investing in cryptocurrency has dropped sharply over the past year. And while millennials and Gen Zs are increasingly interested in the technology, smart investors have warned them about its risks. One major factor may be a lack of quality financial information, which contributes to the hype surrounding cryptocurrencies.