By Adinah Brown

The grumpy old man in me wants to say common sense, but I think common sense went into hiding around the time that sharknado first hit the big screen.

Of course, crypto banks have already been broken into, for those who vividly remember the Mt Gox fiasco in 2014. But it seems like the question would be better rephrased in the following way.

What can spoil the Crypto-party?

There are a few issues with any new entity, a point that was rammed home very unsubtly in 2000 during the dot com bubble. Like the early internet stocks, cryptocurrencies still have some concept proving to do. But it has survived in the face of this sort of attack for the last few years since the emergence of Bitcoin, which means that it is probably past that stage.

So at a guess, it’s not going to be the old guard who hate the idea of cryptocurrencies.

Nor the grumpy tax collectors, who have been trying to get their pound of flesh from cryptocurrencies for years. To date cryptos have successfully been able to avoid the “death and taxes” truism, a not insignificant feat in itself. Then again it is bound to be a matter of time before tax collectors, much like the grim reaper himself, find a way to extract taxes from cryptocurrency transactions. It is unlikely that taxation will dull the interest in cryptocurrencies. Most investors and users appreciate it for its safety and usability, the more hardcore users like that it’s unlinked from central banks. Neither of them are likely to move to other options simply because of taxes. With so many people trading and using cryptocurrencies, its growth has surpassed the desire of just avoiding taxation.

Safety has always been a calling card of blockchain technology. Despite a few hiccups in the past, cryptocurrencies have a strong future in that regard, and might even be ahead of the curve in relation to safety of funds.

So it looks like nothing can rob the crypto bank or spoil the cyrpto party. But that doesn’t mean that all is perfect in cyprto world.

For one thing there are a lot of cryptocurrencies around. Honestly, it’s almost too many to keep track of. Some of them have admittedly cool names, though I am still waiting for “Cryptonite”. The glut of currencies impacts on trading, diluting the pool of traders for only a few currencies and spreading them out over all of them. This manifests itself in large spreads and significant volatility. A quick perusal of coinmarketcap.com’s 24 hour percentage change will prove this element conclusively. Although the results are likely to be skewed to the “penny cryptos” there is still too large volatility in even the more mature cryptos. And this is directly related to the number of traders and positions in the market. So, whilst not a significant issue at this stage, it does point to the stage of market maturity in the cryptoworld.

Because of this, and because of the movement away from traditional metrics for fundamental analysis, risk management is particularly difficult. If there is not a lot of counterparties to a trade, your trade might not be able to be filled at the price you want. This makes stop loss activities particularly fallible. Large spreads, a sign of volatility, also discourage smaller trades, again limiting the potential for liquidity. All these make the current trading environment challenging, particularly when compared to its cousin, the forex industry.

While all these points add up to a really challenging environment for trading, signs are pointing in the right direction for  the future health of the currency. All these issues are simply because the sector as a whole is small and relatively new. With time, only the worthy currencies will survive and the new currencies initiations will plateau in the face of strong, well regarded currencies.

Despite the challenges, it is precisely at this point that fortunes are made. It is the time for the astute investor to jump on the wave, and ride it into a crypto sunset.

About the Author:

Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.