Choosing whether to go all-in on cryptocurrency is a challenge. Some people would tell you to jump right in, while others would never even consider adopting. Since neither group is likely to understand how a blockchain works, we put together a roundup with the top 5 cons you need to consider before deciding for yourself.
Blockchain is New Tech
Since cryptocurrencies and blockchain have not been around for very long, many industries have not adopted the technology. There are now more theories about using it than there are real-world applications. If blockchain does not reach its potential, many investors could miss out on returns.
Very High-Risk Investment
The prices of many cryptocurrencies often change quickly, and some projects fail miserably. Although there are many success stories, many investments never see any returns. One day, your favorite currency could buy a new car; the next day, it might only be worth a pizza.
Volatility Discourages Use
Cryptocurrencies may be safe and secure, but stability is another issue. With such high volatility, many potential investors and adopters worry about the value of a digital currency. Unfortunately, the volatility will likely continue until blockchain technology is adopted to a much greater degree.
The Majority of Crypto Is an Environmental Disaster
Bitcoin, and any other cryptocurrency that uses a proof-of-work mechanism (i.e., most crypto), requires too much electricity. Bitcoin mining alone uses more power than countries like Argentina and the Netherlands. Since most of the power comes from fossil fuel electrical grids, the environmental impact is enormous.
Governments May Crack Down
In 2021, China banned cryptocurrency. Although that is an extreme case, governments will undoubtedly adopt measures to mitigate threats (real or imagined) to their economies. Even in the U.S., the government has suggested they want to take a heavier hand in controlling digital assets. This uncertainty keeps volatility high.
The bottom line is that cryptocurrency is volatile, and it will be for the foreseeable future. If you want your business to get involved, never risk more than you can afford to lose. For best results, follow the basic, time-tested principles of high-risk investing.