Despite their revolutionary and disruptive advantages that attract millions of investors worldwide, cryptocurrencies still have inherent risks and disadvantages that one shouldn’t ignore if he or she plans to win the cryptocurrency market.
In this article, we’re going to discuss the biggest disadvantage found in the cryptocurrency zone. As an investor, you shouldn’t ignore these things.
Black Market Operations Due to Lack of Regulations
This is arguably the biggest drawback of the cryptocurrency market. The cryptocurrency space’s lack of regulation is conducive to unlawful activities. There are a lot Top Brokerage Firm of grey and black market online transactions that are denominated in Bitcoin and other cryptocurrencies.
Perhaps the most infamous case was the “dark web” marketplace called Silk Road, which used Bitcoin in facilitating illegal drug purchases and other illicit activities before it was shut down in 2014.
In other words, the same strength that makes cryptocurrencies free from any outside intervention is Online Stock Brokers also one of its biggest weaknesses.
Financial Loss from Data Loss
For earlier proponents of cryptocurrencies, digital currencies that are adequately secured can become a huge support for a decisive move away from physical cash, which they believe as imperfect and inherently risky.
They say that if we assume a nearly uncrackable source code, authentication protocols, and sufficient hacking defenses, we can safely store money in the cloud or a physical data storage device – maybe even safer than a purse or a wallet.
On the other hand, we also must assume that all cryptocurrency users are taking proper and adequate precautions to avoid data loss. To illustrate, imagine a user who stores his private keys on single physical storage devices. If the device is lost or stolen, he will suffer irreversible financial loss.
Even those who like to store their data with a single cloud service can suffer losses in the event that the server becomes physically damaged.
Refunds and Chargebacks
Although cryptocurrency miners act as intermediaries for all of the cryptocurrency transactions, they’re not responsible for arbitrating disputes between the transacting parties. The idea of such arbitrator or middle authority does not go in line with the decentralized nature of cryptocurrencies.
This means that there’s no one to appeal to if you get cheated or victimized in a cryptocurrency scam. Even if there are newer cryptocurrencies that try to address such concerns surrounding refunds and chargebacks, the solutions proposed are still largely unproven or incomplete.
For comparison, the traditional systems like Visa and PayPal often have intermediaries that can help resolve buyer-seller disputes and issues, with their chargeback and refund policies designed to prevent seller fraud.
High Volatility and Manipulation
Many cryptocurrencies have few outstanding units that lie in the hands of a bunch of individuals, which are often the creators of the cryptocurrency and associates. These people, then, can effectively control or manipulate the supplies of the digital currencies. This can make the cryptocurrency susceptible and vulnerable to wild value swings and outright manipulation, which is a huge disadvantage for those who don’t have much.