Say for example that cryptocurrnecies like Bitcoin were deemed to be another form of currency, then its exchange rate would be so volatile. In a 3-month period from December 2017 all the way to February 2018, Bitcoin has experienced a decline of over 50 percent. Not only that, Bitcoin website itself has reported that 46 percent of initial cryptocurrency offerings have miserably failed.
Firmer and more Solid Rule Implementation
What this mean is, companies that are in the financial service sector ought to exercise stricter fiduciary by means of doing the following:
- Provide appropriate disclosures
- Supervising portfolio recommendations involving cryptocurrency and;
- Educating investors
Cryptocurrency market additionally has high risk for liquidity. As per CoinDesk, total cost to make a million dollar bitcoin transaction may run between 10,000 all the way up to 100,000 dollars. Centralized exchanges have not seen this coming resulting to liquidity and bottleneck issues.
What are the Risks?
Concerns related to liquidity are also confounded because investors cash out of cryptocurrencies and might find it difficult to deposit proceeds because of safeguards that are related to fraud prevention and money laundering.
Financial institutions and investors can’t just separate related risks and technology from cryptocurrency. Blockchain technologies will eventually impact the worth of crypto. If it becomes obsolete, then it might make crypto to lose its value.