What are the main risks of investing in cryptocurrency?

Investing in cryptocurrency carries several significant risks.

1. Volatility: Cryptocurrencies are known for their extreme price fluctuations. Values can soar or plummet within hours, leading to potential substantial losses.

2. Regulatory Uncertainty: The regulatory landscape for cryptocurrencies is still evolving. Changes in laws or government policies can impact the market dramatically, potentially rendering certain investments worthless.

3. Security Risks: Cryptocurrency exchanges and wallets can be vulnerable to hacking. Investors risk losing their assets if proper security measures are not taken.

4. Lack of Consumer Protections: Unlike traditional financial systems, cryptocurrencies often lack robust consumer protections. If an exchange fails or a scam occurs, recovering lost funds can be nearly impossible.

5. Market Manipulation: The relatively low market capitalization of many cryptocurrencies makes them susceptible to manipulation by large holders or "whales," which can distort prices.

6. Technological Risks: The underlying technology of cryptocurrencies can be complex and may have vulnerabilities. Bugs or flaws in the code can lead to significant issues.

7. Emotional Decision-Making: The hype surrounding cryptocurrencies can lead to impulsive investment decisions, often resulting in losses.

Investors should conduct thorough research and consider their risk tolerance before investing.