8 Risks of Investing in Cryptocurrency: What You Need to Know

As cryptocurrency is now, it’s volatile and highly centralized

Venturing into the realm of cryptocurrency investing presents both promising opportunities and daunting challenges. To examine the intricacies and mitigate potential pitfalls, we’ve assembled a panel of eight esteemed experts, ranging from visionary founders to seasoned attorneys. Together, they offer invaluable insights into the critical risks associated with cryptocurrency investments, debunking misconceptions about crypto anonymity and illuminating the perils of exchange hacking. Join us as we navigate the complexities of the crypto landscape, guided by the wisdom of these thought leaders.


The one risk of cryptocurrency investing is its selling point: anonymity and decentralization. As a technology editor, I can tell you that cryptocurrency is highly centralized and always leaves trails of transactions. If you are invested in cryptocurrency thinking it’s decentralized and gives you privacy, you are dead wrong. Any investment you make in crypto leaves a trail that government agencies such as the FBI and IRS can track.

Today, you are required to file taxes for any cryptocurrency transactions. If you fail to do so, you might be in trouble as it opens a risk for the government and authorities to track your financial transactions and activities. Criminals have also relied on cryptocurrency to transfer their money into legitimate businesses. The flow of illicit transactions in cryptocurrency is attracting the interest of governments across the world, increasing the possibility of stricter regulations. 

As cryptocurrency is now, it’s volatile and highly centralized. If you purchase tokens on a centralized exchange like Coinbase, the keys are not yours; the platform controls them, unlike the purported selling point of decentralized ownership of cryptocurrency.

Bobby Lawson, Technology Editor/Publisher, Earth Web


I’d like to focus our discussions primarily on Bitcoin, as I believe it’s crucial to understand the risks of projects driven by venture capitalists, which constitute the majority of cryptocurrencies distinct from Bitcoin. In my perspective, Bitcoin functions more as a savings technology than as an investment.

When delving into investment advice, it becomes challenging, especially considering that many individuals lack substantial savings. Approaching volatile markets like crypto requires a mindset centered around savings technology. It involves contributing a manageable amount regularly, be it $1, $10, or $100 per month, within one’s affordable limit.

It’s essential to recognize that Bitcoin isn’t a shortcut to sudden wealth; rather, it serves as a safeguard against the gradual depreciation of fiat currency. Consider it more as a “don’t get poor slowly” scheme, emphasizing its role in protecting wealth from the constant debasement of fiat currency.

Andrea Carnimeo, Founder, blockdyor


When considering investing in cryptocurrency, one crucial aspect that often gets overlooked is the importance of understanding the use case of a particular cryptocurrency, not just its popularity or who’s invested in it. It’s essential to recognize that cryptocurrency isn’t solely about anonymity or a stance against traditional financial systems. As crypto continues to gain mainstream acceptance, its purpose and practical application become increasingly significant.

The risk here lies in investing without fully grasping the functionality and utility of the cryptocurrency. What problem does it solve? How does it intend to integrate into existing or future markets? Does it have a unique technology or governance model? These questions are as important as its market performance or who is backing it.

As crypto becomes more universally acceptable, it’s critical for potential investors to look beyond surface-level factors. A cryptocurrency should serve a real, tangible purpose to ensure long-term viability and stability. Without understanding the underlying use case, investors might find themselves caught in transient hype, risking their investments in projects that might not have enduring value or practical use.

Delante Greer, Financial Planner, Opulentia LLC


You can lose all your invested money in cryptocurrency in an instant. People talk about the volatility risks of stocks and other investment sectors, but cryptocurrency tops them all. I have handled legal cases of people trying to chase their money after a cryptocurrency token’s price went to zero. 

I have lost over $1,000 trying to invest in new tokens with the hopes of making millions. Many people usually invest in cryptocurrency to make thousands and millions but end up losing everything. 

Here’s why. Cryptocurrency investment does not come with any legal protections like equities and credit cards. Cryptocurrencies are very volatile, and you can lose more than 90% of your investment in a day, an hour, or even a minute. Scams in the crypto industry are common, and when you fall victim to such scams, your money is gone. Any person looking to venture into cryptocurrency investment should consult professional financial advisors to avoid losing their money.

Martin Gasparian, Attorney and Owner, Maison Law


Be wary of any coins or exchanges that advertise exorbitant interest rates on what you can earn just by staking with them. Often, when it feels too good to be true (wow, 18%!), it is.

MP Spierer, CEO, P&S Machining & Fabrication


The main risk associated with cryptocurrency investing is not the asset itself, but the regulations and governance that could put you in legal jeopardy. In the United States, we already receive conflicting information from different regulatory bodies, such as the Commodity Futures Trading Commission and the Federal Trade Commission. That makes it hard enough to understand what you can and can’t do. If you perform cross-border transactions, it can get even more challenging. 

Now consider that central bank digital currencies (CBDCs) are on the horizon. Decentralized digital currencies like Bitcoin will be in direct competition with CBDCs. So, we can expect lobbying and subsequent legislation to squash that competition, thereby further increasing the risk associated with cryptocurrency investing.

Dennis Consorte, Digital Marketing & Leadership Consultant for Startups, Snackable Solutions


One significant risk of cryptocurrency investing is volatility. Cryptocurrency prices can be highly unpredictable, with frequent and substantial fluctuations. This volatility can lead to rapid and significant gains, but it also exposes investors to the potential for substantial losses. Cryptocurrency prices are often influenced by market sentiment, news, regulatory developments, and macroeconomic factors.

Events or announcements can trigger rapid market movements, and these are not always scheduled events. The cryptocurrency market is also relatively young and lacks the regulatory oversight seen in traditional financial markets. This lack of regulation can contribute to tremendous price swings, as any tiny bit of news one way or another can drastically impact market prices.

Erika Kullberg, Attorney, Money Expert, and Founder, Erika.com


It is generally recommended that, in order to compromise the transaction ledger of a blockchain, an assailant must possess authority over a majority of the validation nodes within the network. 

Upon attaining a significant market presence that attracts investor attention, a cryptocurrency is likely to be impervious to brute-force hacking attempts. Nevertheless, the cryptocurrency exchange that facilitates crypto transactions and safeguards digital assets remains susceptible to additional cybersecurity risks. The aforementioned scenario is frequently reported in headlines pertaining to “crypto hacks.” 

Consequently, it is critical to utilize crypto-trading services that are fortified against hackers. It is advisable to commence by examining prominent platforms such as Coinbase (CRYPTO: COIN), Binance, and Kraken, which are perpetual targets of attacks yet seldom compromised. Additionally, you should enable the most stringent login security available for the service of your choice.

Harrison Jordan, Founder and Managing Lawyer, Substance Law

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