While many individuals have spent much time lauding cryptocurrencies and blockchain, it should be noted that it still suffers from various drawbacks. These drawbacks have led to many successful investors being wary about investing in cryptocurrency. Even Warren Buffet referred to cryptocurrency as a “bubble”. Considering that a bubble eventually bursts, it is imperative to know what these drawbacks are so you’ll be better prepared for your crypto journey.
While the use of cryptocurrency is rapidly increasing, it is not yet on the level of other payment giants like VISA and Mastercard. The number of financial operations and transactions processed daily by these payment icons still puts them miles ahead of cryptocurrency. The speed at which crypto transactions are completed is not yet on par with major players like VISA and Mastercard. The issue of scale in crypto lies in their technology and infrastructure and there is still room for improvement, although several solutions such as sharding, lightning networks, and staking have been presented as options to prevail over the scalability problem.
Cryptocurrency heavily depends on digital technology, so it is vulnerable to cybersecurity breaches and hacks. There are several worries over using crypto exchanges, however, the fact that crypto exchange accounts can be breached is the most prominent issue. There are already several proofs of this such as reports of breaches into several ICOs, costing people millions of dollars. Crypto security infrastructure has to be managed and controlled better than it is currently.
Lack of Regulations
When billionaire investor Warren Buffet highlighted the shortcomings of cryptocurrency, he emphasized the absence of any regulatory body managing assets in the crypto market. Due to the absence of any regulatory management, the system will inevitably implode soon. The inherent technology can be perfected, however, without a regulatory body, crypto will always be at risk of crashing.
Crypto Volatility and Value
For both amateur and experienced crypto investors, the thought of making returns is what drives their investment. However, the high degree of volatility in cryptocurrency prices heavily impacts the chances of making any returns. Crypto’s ever-changing value can be attributed to the fact that digital currency isn’t associated with any tangible asset.
Worries About Evolving Technology
There are certain logistical issues with trading in cryptocurrency. These are mainly associated with the infrastructure and technology that the cryptocurrency involves. For example, when the infrastructure or technology connected with crypto needs to be reshaped, the protocols will also have to be changed. This can be a hectic and time-consuming process. The normal functional and operational flow might be interrupted and result in further issues.
Crypto Is Yet to Prove Itself As a Long-term Investment
Although cryptocurrencies have become well-known, it is worth noting that they have been around for only a decade. The idea of cryptocurrency only emerged in 2008, with a publication on Bitcoin. However, stock markets have centuries of history. For example, the London Stock was introduced in 1801. Nobody knows what will really happen with crypto in the future, so you have to be fearless to delve into these unexplored waters.
With all these drawbacks, it is rational if experienced investors choose to stay away from digital currency for now. However, it will continue to grow because it offers way too many advantages to consumers today. Take your time to learn about crypto before making any investments.