1. Volatility: Cryptocurrencies are known for their extreme volatility, making them extremely risky investments. Prices can swing wildly up or down in the space of a few minutes and investors can suffer huge losses if they enter them unprepared.
2. Regulatory Uncertainty: Despite some governments embracing cryptocurrencies, a majority of countries remain uncertain as to how to handle them. This has led to a lack of clarity on regulations around ICOs, taxes, and trading, which can add risk to investors.
3. Security Risks: Cryptocurrency exchanges and wallets are vulnerable to cyber attacks and theft of funds, meaning that investors may not have full control over their money. Additionally, if a wallet is lost or forgotten, there is no way to access the funds it contains.
4. Fraud: Scams and fraud are rife in the cryptocurrency space, with many illegitimate projects designed to steal money from unsuspecting investors. It’s vital to only invest in coins and tokens that have been thoroughly researched and carefully considered.