Two major risks in crypto industry and how to mitigate them

Two major risks in crypto industry and how to mitigate them

September 14, 2019 Off By Rob Logan

Cryptocurrency reportedly holds the future of the investment and trading world. The digital asset community speaks of excellent returns and such potential promises have drawn in many aspiring traders in large numbers. But, you can’t deny that the said industry is highly volatile and hence could be risky for investors. Moreover, cyber hacks leading to losses in millions are not uncommon for crypto exchanges.

Put simply, the crypto market is risky. However, the fear of risks should not dampen the spirit of aspiring investors from capitalizing on the huge prospects the industry has to offer. The post below offers a brief on the typical risks in the crypto market- followed by a brief on how to bypass them.

Market risks

As mentioned earlier, the crypto industry is extremely volatile. It’s true that volatility of major coins like BTC has reduced considerably of late given its increasing adoption as an investment asset. However, there are many other crypto coins which have not received such widespread exposure and adoption. As a result, these coins still experience severely erratic intra-day price shifts.

It’s to stress here that crypto industry is mostly news-driven. Every coin here carries its specific risks. Rumors and misleading media campaigns perpetuated by rival blockchain companies can lead to substantial intra-week and intra-day price drops.

The best solution here is diversification of crypto assets. Do not put all your money on one single crypto coin- rather diversify your investment sum into multiple coins. This way, if one coin shows a downward trend, you still have other coins to hold on to.

Cyber security risks

Crypto exchanges are a much-loved prey of illicit cyber hackers today. The victims are not only small-scale exchanges with limited infrastructure. In fact, hackers today have also found out advanced means to breach the security of many big-scale exchanges as well. The total stolen amount from crypto exchanges has crossed 1.3 billion USD this year. The worst sufferers here are the crypto investors/traders who store their crypto assets in the exchanges for trading.

According to experts, you should look for a crypto exchange that stores most of its funds in cold wallet. Such wallets are offline wallets and hence beyond the reach of cyber hackers. For example, rising decentralized crypto exchange Decoin stores 97% of funds in cold wallet to bypass hacking risks. Moreover, the company conducts regular security checks to stay aware of suspicious activity (if any) on its platform. It enables the platform to take prompt steps to curb down any illicit advancement right on time.