Let me be honest at the very onset, cryptocurrency was never a straightforward gamble. It required extreme caution, judgement and in spite of sounding unreasonable, a bit of luck. Unlike conventional investments, cryptocurrencies have undergone swashbuckling ups and heartbreaking downs. For the early investors, the rise of Bitcoin is a phenomenon they would not forget in a hurry. In the summer of 2017, it got valued at $20000 and its immediate aftermath was even more breathtaking. Bitcoin crashed to below $10000 before it stabilized. It is currently lying at around $6000, a fall from the heady days of 2017.
One of the reasons why cryptocurrencies gained so much popularity was the unbridled freedom it gave to its investors. It was based on a peer to peer transaction premise with no third-party intervention. As a result, the turnaround time was quick with nil transaction fees. However, this arrangement, as per the established authorities, was dangerous. Technology reliance was good but too much if it wasn’t. Also, because of the freedom, cryptocurrencies provided, it became a playground for money laundering and fraud. The loss of freedom, analysts say, could become the death knell for cryptocurrencies.
Many view investments into cryptocurrencies as short term. One can only get a substantial return if the money poured in is locked for a substantial time. This quick-fix investment plan leads to more volatility in the market.
If you thought, cryptocurrency was above one and all, you are mistaken. There is widespread manipulation. Several pumps and dump schemes are said to be running alongside. The Modus Operandi is simple. Pump the value of crypto and then sell-off in bulk at its peak. Because there is no third-party oversight this is quite easy to achieve.
The rise of Bitcoin is now being investigated by the Department of Justice. There is a possibility of manipulation through Tether, a stable coin issued by Bitfinex, which was responsible for Bitcoin’s meteoric rise.
Diversification doesn’t work in cryptocurrencies, the way it does conventionally. The reason being Bitcoin’s command over the overall market cap. This is because most tradings happen between Bitcoins and altcoins and the system doesn’t allow conversion of fiat or government-backed currency to crypto.
One of the biggest reasons why cryptocurrencies, even after gaining much traction, has not been able to take off is because of easy liquidity. Exchanges do not have enough liquidity for diversification and stability.