Cryptocurrency – the silver bullet
When cryptocurrency came into this world in 2008/2009 – with the whitepaper on the first cryptocurrency, Bitcoin, written by a person under the pseudonym Satoshi Nakamoto, it made a very serious claim; that it was the answer to ‘it all’. Bitcoin was presented as the solution to:
- Slow money transfers
- High taxes and hidden fees
- Almost non-existent security for money transfers
- Heavy regulation
- and the absolute monopoly banks had on the financial system.
While it did deliver on some of those promises, Bitcoin and the subsequent cryptocurrencies that were created largely due to the introduction of blockchain introduced completely new problems and risks of their own.
If you haven’t noticed, cryptocurrencies are extremely volatile. There are many reasons behind that (especially in 2022 opposed to the early days of crypto when there weren’t so many large financial institutions and ‘whales’ involved in the scene), but the bottom line is that if you buy cryptocurrencies as an investment – make sure you do your research. Every asset, digital or regular, has its own risks and own little bits and pieces that govern the way the market behaves; it only makes sense to do your due diligence in advance. Buying large amounts of crypto without understanding the underlying mechanisms of the market is like buying a property in a bad part of town and dreaming big of it becoming 10 times its value in 6 months; it won’t happen.
Not a shocker, but fraudsters are inventing more and more new ways of stealing cryptocurrencies. This comes as a natural consequence of the evolution of technology and the way people invest in, trade, buy and sell assets. There are many, many ways for someone to get a hold of your cryptocurrencies; one of the most common unfortunately being out of your control – crypto exchanges being hacked. We won’t get into too much detail on why it’s never a good idea to keep your crypto in an exchange (as we’ve covered that in an article on How to protect your crypto, but that’s one of the most common ways for people losing their digital crypto assets.
This might not be an obvious one. The ‘normal’ financial system has been around for, well – centuries. And if we take into account the fact that one of the first reasons (arguably the first) for laws and legal systems to come into existence was to serve the evolving economic relations and needs of people, it’s safe to say the bank, insurance, trade and many more industries have been very well regulated for quite a while.
That is not the case with cryptocurrencies.
While there are many countries and companies that are making active efforts towards wider crypto adoption, the legal framework within which cryptocurrencies exist is very thin at best, if present at all in some cases. That means your crypto investments are way more susceptible to shifting regulations than your other assets.
It’s never a bad idea to make sure you thoroughly check your country’s regulation on cryptocurrencies before committing large chunks of your other assets to any coin.
The biggest danger for your crypto
The biggest risk that lurks around the corner however is not something you’d immediately think of. While regular digital or other assets are rather well established and involve a lot of known intermediaries (such as banks, insurance companies, brokers, exchanges, etc.) and a lot of mechanisms to ensure the continuity of your hard work, cryptocurrencies have a long way to go in that sense. If you pass away, most if not all reputable financial institutions – such as banks, insurance companies, brokers, etc. – are under an obligation to disclose information on your assets either directly to your heirs or indirectly, via a government institution (a legal court for instance).
That rarely happens with crypto.
In other words, unless you’ve made sure to include your crypto assets in your will or if you aren’t using a digital inheritance service, there’s a very high chance it’ll literally go to waste instead of reaching your rightful heirs – your loved ones. That’s not what comes to mind right after thinking of risks related to your crypto, but each year billions of dollars-worth of crypto is lost inadvertently due to the people that are supposed to inherit it not knowing about its existence.
Luckily, nowadays there are digital inheritance services – such as DGLegacy – that help you to not only categorize and keep track of your crypto assets, but also leave crucial information for your loved ones in case something unfortunate happens with you. It only takes a few minutes to create an account, list as much information as you choose and to assign your beneficiaries to your crypto and other assets, who are notified in case of an unforeseen event. But those few minutes save a lifetime’s worth of hard work going to waste.