The Risks of Investing in Cryptocurrency in Nigeria

The Risks of Investing in Cryptocurrency

Cryptocurrency has become a topic for investors in the last few years. We're talking about things like Bitcoin, Ethereum, Cardano, Polkadot, and many other new digital currencies.

Bitcoin's price alone has risen over 358% in the last year and 121,669% since its inception, with a market capitalization of over ₦516.38 trillion. Ethereum, on the other hand, is up 988% in a year and 1,318,927% since its launch in 2015, boasting a ₦227.61 trillion market capitalization. Needless to say, investors are pretty excited about investing in cryptocurrency.

But they need to be wary! Here are three things to know about investing in cryptocurrency.

1). Volatility:

Cryptocurrencies are much more volatile than stocks, bonds, or any assets investors are typically used to investing in. You need to be aware that the crypto market can go up 25% in a matter of minutes or hours, or they can crash – something ubiquitous in the crypto market nowadays.

2). Scams:

Beware of scammers now that Bitcoin and Ethereum have become so valuable in the market. Hackers are smoothly hacking investors' funds by accessing their digital wallets, except secured by specially designed platforms to safeguard and protect online funds. Even big exchanges like Coinbase and Robinhood have been hacked, so make sure you're extremely careful with how and what you trade.

3). Tax:

Even though cryptocurrencies are much different than the typical assets investors are used to (e.g., Stocks and Bonds), you are still required to pay taxes on them. The IRS is now going after some investors who have made big profits in trading/holding cryptocurrencies in the U.S. Only fewer than 1000 people reported their gains last year to the IRS.

Some billionaires even put as much as 5-10% of their personal net worth into cryptocurrencies because they believe it could be the next big thing, even more than the internet boom. Now we're not talking about just the dot-com bubble and bust, but everything that came after made many investors extremely rich. Even youngsters who aren't even up to 18 have amassed a fortune from the crypto market.

EndNote: None of these is meant to be construed as investment or financial advice. We urge everyone to do more deep personal research before investing.

Make sure you check out our other blog posts for more information about the crypto market and trending entertainment headlines. Thanks for reading!