A few of these risks, significant for long-term investors, include the following:
Regulatory risk. Several countries have banned or plan to ban cryptocurrency, or put heavy regulation over its trades. If this trend continues and is enforced, it could have a significant impact on the currency and its continued use.
Low barrier to entry, difficult exit. A low barrier to purchase allows investors to rush in and causes inflation in price, but limited counterparties can bar exits.
Theft. With the rise of cryptocurrency value, hackers’ attempts to steal large amounts of the currency have also increased.
Market manipulation. Cryptocurrencies are particularly prone to social engineering and misinformation risks. For example, a tweet from a celebrity can significantly impact the valuation of the asset