The risks in trading cryptocurrencies

This is a list of some of the risks typical for cryptocurrency trading/investing:

  • the exchange you keep your coins on, can just disappear and you will never see your coins again. There is no investor protection in cryptocurrency trading because it is not a regulated market https://themerkle.com/top-4-bitcoin-exchanges-which-disappeared-under-suspicious-circumstances/
  • the exchange you keep your coins on, can be seized by the FBI and they can decide whether to return the coins to their rightful owners or not https://www.reddit.com/r/Bitcoin/comments/6q73yq/btce_seized_by_us_government/
  • the exchange you keep your coins on, can disable your account, because you live in the wrong state and you might never see your coins again https://www.cryptocoinsnews.com/what-happens-to-customer-funds-when-coinbase-exits-a-jurisdiction/
  • the exchange you keep your coins on, can get hacked and your and everyone else’s coins can get stolen – https://www.wired.com/2014/03/bitcoin-exchange/
  • the exchange you keep your coins on, if they are Proof-of-Stake, can decide to forcefully hold your coins in their own wallet to stake them, and get the staking reward. PoS coins’ wallets have been in “maintenance” for months on cryptoexchange Yobit. Users have been complaining and sending emails but all Yobit reply with, is that there are problems with the wallets and work is being done to fix them, while in fact it is known that those particular cryptos’ wallets are fine, and the situation has been like that for months
  • your government can make it illegal for you to trade cryptocurrencies https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory
  • your bank can decide to freeze your account or reject your incoming transaction if the source of the money is trading cryprocurrencies https://news.bitcoin.com/bitcoin-exchanges-victim-banking-problems/
  • you can lose your private key – if you had it backed up on paper – you can lose it, it can be flooded or burn; if you had it backed up on a cd – you can break, scratch, or lose the cd; if you had it backed up on a USB stick – USB sticks go bad remarkably easy
  • your private key can get hacked or stolen – hackers with access to your computer via spyware, remote viewer, WiFi network, the internet, can access your computer and copy your private key (if you keep it in a file) or your wallet.dat file. Whoever owns the private key, owns the tokens.
  • your exchange account can get hacked or broken into – same as above, they can find out your email/password combination, get in your account and transfer the funds elsewhere
  • your email/password combination for the exchange can be obtained in plain text, if you register at a malicious website that serves cryptocurrency traders (or an ICO, an airdrop of cryptos, a new exchange etc) – and instead of them encrypting your password on its way into the database, they can preserve it in plain text format if they want to, then use the same email/password combination to try to log in on other exchanges, especially ones that do not support two-factor authentication
  • your email/password, account, wallet or private key can get easily stolen if you use your Android device to trade cryptocurrencies because Android devices are the least secure, and can get their traffic intercepted and apps decompiled with almost no effort
  • due to the nature of cryptocurrencies, you can lose all or most of your money in the big price fluctuations that can vary with hundreds of percents in a single day
  • the cryptocurrency you’ve invested in can be abandoned by its developers after a pump-and-dump scheme, or after the ICO
  • the cryptocurrency you’ve invested in, can just quietly go to 0.00000001 satoshi and never recover if there is no interest in it and no development
  • the cryptocurrency you’ve invested in, can get delisted from all exchanges it is being traded on, and/or just disappear
  • the cryptocurrency you’ve invested in, can suffer source code bugs and complications that can mess up your balance/transactions/wallet and your coins can be lost forever

So yeah, be wary when trading/investing in cryptocurrencies.


Subscribe to get immediate updates once a new report is available


Subscribe to the weekly newsletter: