1. Volatility: Digital currencies are highly volatile and can fluctuate up and down in value quickly, making them a risky investment.
2. Lack of Regulation: Digital currencies are not backed by any government or central bank, leaving them without the protection normally provided by such institutions.
3. Counterparty Risk: When buying digital currency, you must trust that the seller will deliver what was promised and transfer the funds to your wallet.
4. Security Risk: Like any online asset, digital currencies are vulnerable to fraud, theft, and hacking.
5. Tax Risk: Governments may try to tax digital currency transactions, creating an additional burden on investors.