1. Volatility: One of the biggest risks of investing in cryptocurrency is its extreme volatility. Cryptocurrency prices can fluctuate dramatically and rapidly, so investors must be aware that they could lose a large portion of their investment in a short amount of time.
2. Fraud and Security Risks: Cryptocurrency exchanges are not as heavily regulated as traditional stock exchanges, making them more vulnerable to fraud and security breaches. As such, it’s important for investors to thoroughly research any exchange or wallet service before investing.
3. Regulatory Risk: Governments around the world have taken various steps to regulate cryptocurrency, including banning the use of certain digital currencies or implementing taxes on them. Investors should stay abreast of any changes in regulation that could have an impact on their investments.
4. Technical Risks: Advanced technical knowledge is often required to properly use cryptocurrency. Misunderstanding how cryptocurrency works or making mistakes when using wallets or exchanges can lead to loss of funds.