Cryptocurrencies: When Security and Risk Merge

Digital technologies became ingrained in our everyday lives. For a long time, the world has been evolving toward various gadgets and using technological solutions for productive use only. The latest global financial crisis forced the technological and financial world draw its focus toward something new: cryptocurrencies. Cryptocurrencies are financial units, which are beyond the control of any of the global regulators. The absence of intentional risks has already attracted a lot of users to the world of virtual currencies and this number is rising fast.

At the moment, the safety standard of each cryptocurrency is the number of its users. These are the people, who believe that the virtual monetary unit has a potential and prospects and, thus, push its price to the upside. If the user base of some cryptocurrency is constantly expanding during a particular period of time, it is pretty safe to invest in it. This is the most important thing to pay attention to. Right now, there are two cryptocurrencies that fit this description, Bitcoin and Ethereum. The first one is probably known even to those, who have nothing to do with the economy and finance. If a user wants to buy a cryptocurrency, they buy Bitcoin and only after that they look closer and find out that there are others. In fact, at the moment Bitcoin is some kind of a “reserve currency”, which none of the global regulators have been able to get their hands on. This is why it is growing so fast – it’s a reward for risks and prospects if there will be any, of course.

Ethereum has a more advanced programming platform, and although there are tough market competitors, this cryptocurrency is pretty safe in the nearest future. Most of the new blockchain projects are launched on the Ethereum platform.

These two assets, Bitcoin and Ethereum, are the safest on the cryptocurrency market right now, considering the fact that a few people heard about their competitors. Are they stable? If we’re talking about the cryptocurrency market volatility, then yes. It means that their prices may rise or fall by 10-20% during the trading session, but it’s impossible for them to get, for example, ten times cheaper over the same period of time. The high volatility of the cryptocurrency market is the payment for the sector growth rate, which is unequaled anywhere in the world.

A bit later, in 6 to 12 months, those who buy the Bitcoin will slowly “migrate” into other cryptocurrencies. After the financial world starts seeing the cryptocurrency as a legal payment instrument (Japanese are ahead of the curve, they’ve already done this), people’s trust in the virtual currency will increase. However, there is a risk that the number of users may stop expanding at some moment of time or start decreasing, which is even worse. No one can guarantee that it is not going to happen. So, this risk is also included into the cryptocurrency volatility. In other words, high profits at one point of time don’t guarantee the same in the future. This is a very important thing to consider when one starts investing into cryptocurrencies.

RoboForex is a group of companies that offers brokerage services to clients in various countries over the world. The group provides traders from the Forex and stock markets with access to its proprietary trading platforms. 

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.