In the recent years, and especially in 2017, there has been a crypto-surge of cryptocurrencies such as Bitcoins, Ethereum, Ripple, Altcoins among others. Cryptocurrencies are digital assets that are secured by cryptography. Cryptocurrencies have gained popularity due to their high prices and the increased demand. However many investors are skeptical about using cryptocurrencies.
Some of the reasons why many investors were skeptical about bitcoins and cryptocurrencies include;
Investing in cryptocurrencies is a high risk mainly because the prices have become quite volatile lately. The prices for Bitcoins was $1300 in January 2017 and was $1700 in September 2017. The investors such as PwC, are skeptical about this investment because the ecosystem surrounding Bitcoins is not enough for studies of their suitability for investment by fundamental analysts. Also due to the ever-rising prices due to no regulation, more people are lured to invest which will eventually lead to the formation of some bubble that will lead to losses when it bursts.
No clear origins
Many investors like it when they know the roots of a product. Bitcoin promoters are reluctant to label it a commodity and claim that Bitcoin is mined through some complicated mathematical formula. They also claim that it is not controlled or owned by any government, therefore, making it democratic but not a currency. According to S.P Sharma, the Chief Economist of Ph.D. Chamber of Commerce, cryptocurrencies are risky for people as well as businesses as it is just a formula with no tangible assets and is only supported by demand.
No regulating body
Bitcoin is neither regulated by governments nor by banks, which makes it a very insecure space to invest. Once you get ripped off or cheated in a bitcoin transaction there is no way of recovering your money. It is not possible to reverse a deal. Not even in cases where you send your money to a scammer or when a hacker steals it from your account. According to economist Nobel-peace prize winner, Joseph Stiglitz, Bitcoin is morally dubious as well as bad for the global governance as well as for the macroeconomy.
Not accepted worldwide
Cryptocurrencies are so new thus many investors are reluctant to adopt them. Many countries have not legalized transactions using Bitcoins, therefore, a disadvantage to any investor planning to use them. One has to make sure that cryptocurrencies are accepted and authorized in the place where you are planning to use it. However, investors should not lose hope entirely because legalization of cryptocurrencies is being done all over the world in time.
Is it a Ponzi Scheme?
Many people have been victims of pyramid schemes. Many investors do not trust cryptocurrencies because they are new. The risk of fraud is very high. There is a lot of misinformation on cryptocurrencies such as Bitcoins, which lead to the rise of fraudsters who promise the unknowing investor high returns. Also, use of virtual currencies has been increasing in the global marketplace makes it easier for fraudsters to cheat investors into Ponzi schemes. The uncertainty on who to trust is one of the reasons why many investors are choosing to stay out of cryptocurrencies.
There are many other reasons why many investors are still skeptical about the cryptocurrencies. However, it all depends on whether one is willing to take the risk. Who knows? It might be a good thing to try. If an investor is a risk taker, they can make the jump.