Cryptocurrencies are taking hits from all sides, from falls in value to corporate bankruptcies, lawsuits, and regulatory threats. A Pew Research Center study finds that only 24% of Americans think that investing, trading, or using digital assets is safe. One of Bitcoin’s most vocal supporters, Anthony Scaramucci, told investors in 2021 not to allocate more than 5% of their total savings to cryptocurrencies.
Recent successes in the crypto markets have caused many holders to lose confidence in this digital asset class. Many factors contribute to this decline in trust. Such as market volatility, fraud, scams, crypto exchange bankruptcies, hacking incidents, and regulatory and environmental concerns.
One of the most important factors affecting the value of cryptocurrencies is market volatility. Cryptocurrency markets are notoriously volatile, with prices fluctuating rapidly in response to the news, regulatory changes, and investor sentiment.
This volatility can be incredibly challenging for investors unfamiliar with the intricacies of the crypto market, leading them to panic sell and incur serious losses.
Governments and regulators around the world have been increasingly scrutinizing the cryptocurrency industry, with many raising concerns about its potential for money laundering and other illegal activities.
The lack of clear guidelines has left many investors needing clarification on the future of cryptocurrencies.
Piracy and Environmental Concerns
The bankruptcy of cryptocurrency exchanges and hacking incidents have also contributed to the decline in market confidence. Hacking incidents have increased, with hackers targeting individual investors and exchanges to steal funds. These incidents have generated mistrust in the safety of cryptocurrency investments.
On the other hand, environmental concerns have also caused investors to lose faith in cryptocurrencies. Crypto mining requires a significant amount of computing power, which in turn requires a lot of energy.
The large amount of energy required has raised concerns about the environmental impact of cryptocurrencies, especially with climate change a growing global concern.
Frauds, Scams, and Lack of Trust
While cryptocurrencies are not inherently fraudulent, a lack of regulation and oversight has led to an increase in fraudulent activities related to cryptocurrencies. Scams such as phishing hacks, fake ICOs, and Ponzi schemes have fooled many investors, leading to a loss of confidence in the cryptocurrency market.
Recently, a Hong Kong-based investor lost all his savings, worth almost HK$7 million. It is reported that he fell victim to an online cryptocurrency investment scam. A Pew Research Center study revealed that the majority of Americans do not trust the safety and reliability of cryptocurrencies. The report highlights the following:
““Among the vast majority of Americans who say they have heard at least a little about cryptocurrency (88%), three-quarters say they are not very confident that current ways of investing, trading, or using cryptocurrency are reliable and secure.”
Restoring Trust and Faith: Some Suggestions
Restoring confidence in the safety and reliability of cryptocurrency investments can be challenging, but several steps can be taken to address this issue, such as: building a regulatory framework by governments; the prioritization of security by companies that provide cryptocurrency wallets and exchanges through the implementation of best practices to protect user assets; investor education regarding the benefits and risks of cryptocurrencies; the transparency of companies about their operations and finances; and building a strong community around crypto can help restore confidence in its safety and reliability.
By Audy Castaneda
