Article by: Brad Eaton Vice President, Investment Services
With the prices of Bitcoin and many other cryptocurrencies at or near their all-time highs, ownership rates have also risen to record levels. Recent studies by Security.org have indicated that approximately 40% of American adults now own crypto, with many more considering purchases over the coming year.
With the surge in popularity over the past year, more and more investors may be tempted to enter the ranks of crypto ownership. At S.E.E.D. Planning Group, we do not advocate ownership of cryptocurrencies, as we believe the associated risks can be significant.
Among these risks are:
Volatility
Cryptocurrencies may experience extreme price movements (volatility risk), thereby exposing their holders to potentially large losses in value.
Regulatory Uncertainties
In the U.S., government regulation of cryptocurrencies is in a state of constant evolution, as users, issuers, businesses and regulators continue to battle it out in court. With the future regulatory environment still very much up in the air, cryptocurrencies continue to be subject to additional volatility and uncertainty.
Security and Scams
In part due to inconsistent regulation, the rising ownership of cryptocurrencies has led to increasing occurrences of fraud. Not all cryptocurrencies or trading platforms are created equal, and some platforms are more secure than others.
Additionally, some newer coins could present a higher scam risk than those more established. At the present time, there is no protection or insurance for lost or stolen cryptocurrencies. Accordingly, prospective crypto owners should conduct thorough research prior to making the decision to purchase.
Technical
In general, crypto is typically stored privately in a non-custodial wallet on a personal device, like an app on your phone or laptop, or in a cold storage wallet. In some cases, crypto can also now be stored by a third-party custodian.
When storing privately, you are solely responsible for the safety and security of your crypto. If you lose your private key, your hard drive crashes, or a virus corrupts your wallet, you may lose your
funds entirely. In a report published by Bankrate.com in October, it was estimated that more than $100 billion worth of Bitcoin has been lost with no guarantee of recovery.
If you have questions about the risks of cryptocurrencies, please reach out to your planner to discuss.
If you are new to S.E.E.D. and would like to schedule a free discovery meeting with one of our fee-only financial planners or wealth managers, please visit www.seedpg.com/contact.
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