Choosing what to invest in is like stopping at a fork in the road and needing to decide which path to take. Imagine two roads in front of you: the left road (representing the stock exchange), beautiful and clear, easy to follow with few obstacles. Even though when walking on that road you still see a little fog, every day it's a little up, a little down, but it's still safe enough for you to walk with peace of mind.
Meanwhile, the road on the right (representing crypto) is like a dangerous adventure full of potholes, rocks, and even obstacles you cannot foresee. If you have the chance to drive through it, your car will become like a piano on the brink of disaster, bouncing several times before landing with an indescribable feeling. That's "volatility" in the crypto world, where everything from rumors to investor moods can turn prices and your assets upside down.
Risk Number One
Some say that, in stocks, four years of volatility is equal to just one month in the crypto world. Perhaps this is like comparing the feeling of riding a speed-adjustable bicycle to being on a wild animal speeding foot by foot at the top of a hill.
And it is the difficulties that come from major fluctuations that are the biggest challenge and risk for those just entering the world of crypto investment.
Unlike traditional assets such as gold or real estate, Bitcoin prices fluctuate greatly in buying and selling activities. You can easily see images of coins growing by a few hundred or even a few thousand percent to coins decreasing in value to nearly zero in the crypto market. In addition, the massive accumulation of large investors, known as "whales," also played an important role in creating sudden fluctuations in the market. Large buying and selling actions by whales can have a significant impact on the price of Bitcoin and create unpredictability for small investors. Not only that, increases and decreases in the value of Bitcoin can occur in a short period of time, requiring you to monitor the market and have an investment plan that quickly adapts to these fluctuations.
Market volatility is a concept in finance that describes the degree of variation and fluctuation in financial asset prices over a specific period of time. It is commonly understood as the ability for an asset's price to change quickly and dramatically in a short period of time.
Volatility in the markets can be caused by many factors, including economic news, market events, investor sentiment, political changes, and global financial conditions. Volatility levels can vary across different asset classes, such as stocks, commodities, cryptocurrencies, and foreign currencies. Highly volatile assets offer the potential for higher profits or larger losses over shorter periods of time than less volatile assets.
Bitcoin has only been around for 14 years, and all inventions and new concepts take time for market acceptance and valuation over time. And the same is true for crypto.
So crypto is still in the process of finding acceptance and trust from the community. This means the price of crypto will fluctuate more.
Risk Monday
Another risk in investing in Bitcoin is that it is not protected by law. Bitcoin in particular or digital currencies in general have not been recognized and protected by law by the Vietnamese state. Currently, there is no agency or organization standing up to protect the rights of Bitcoin investors, so if problems arise such as fraud or property appropriation that cause you to lose all your money, that's okay. It is very difficult to get legal treatment.
Risk Tuesday
Another aspect of risk is security. Events such as hacks on cryptocurrency exchanges can lead to heavy losses for investors. A typical example is the hack of Mt. Gox in 2014, when thousands of Bitcoins were stolen, creating concerns about the safety of cryptocurrency storage.
In addition, regulatory and legal issues also play an important role in risk assessment. As countries are in the process of developing and adjusting cryptocurrency regulations, regulatory changes could have a dramatic impact on the value and acceptance of Bitcoin.
Big risk Wednesday
Politics also contribute to the risk picture, with countries' decisions to support or ban Bitcoin potentially creating instability in the market. An example is when a country decides to support or ban Bitcoin, which can create large swings in its value.
Conclude
After seeing the above risks, does it make you feel discouraged? No, understanding the advantages and disadvantages of any type of investment is an important key to helping you win the "financial game". I believe that when you read this book, you also have certain beliefs in the opportunities that this market brings and determine to accept risks from it. Therefore, I just want to clarify this point of view to avoid those of you who think that making money from Bitcoin is "easy as pie" as many teachers often preach on social media channels.
You are a newbie, you absolutely have the opportunity to earn money from Bitcoin, but you also need to meet certain conditions to be able to earn money. You will gradually discover what these conditions are in the next parts of this Investment Battle series.
