Cryptocurrencies and blockchain technology have the potential to transcend national borders and strip away geographical confines. People across the world can buy the same digital assets, though access may vary. Those in economically unstable countries can access the resilience of U.S. dollar-denominated stablecoins. But as mass adoption approaches and governments tackle regulatory challenges, new barriers stand in the way of investors.
Though crypto has the potential for global adoption, a one-size-fits-all approach to investing will not serve unique investing needs. Each investor’s situation is different, based not only on ownership structures available in their jurisdiction but also what types of investments they want to pursue and their appetite for risk. The lack of personalized solutions hampers both novice investors who are new to the space and experienced investors looking to optimize strategically to fit their own needs.
From an individual’s perspective, it’s difficult and intimidating to navigate the myriad of considerations across investing decisions, structuring, operational security and regulatory considerations. The daunting tasks for newcomers to make decisions across choices of wallets, exchanges, assets and entities before they get to their first transaction should not be done without expert guidance. Beginners are often drawn to the highly attractive and advertised opportunities for investing in crypto, but they should also be made aware of continuously evolving examples of scams, hacks and busts within the asset class. In the last year alone, millions of crypto investors saw their assets frozen due to mismanaged and faceless investing apps.
The collapse of FTX, Voyager and Celsius revealed a glaring problem in the trajectory of crypto’s mass adoption. Lacking proper guidance, many users treated these exchanges with the same risk tolerance as they would with regulated banks rather than emerging technologies, and the security of their assets suffered accordingly. Investors gave up control of their private keys and when the platforms failed, their funds were lost. It is important for holders of crypto to understand where their assets are held and who is responsible for their security. This issue, among others, reflects the need for broad crypto education.
Block Inc. performed a study on Bitcoin knowledge and perceptions earlier this year. The survey clearly highlighted the need for crypto education. It revealed that the top reason people do not participate in crypto is due to a lack of knowledge. Crypto is often thought of as a lone-wolf game. The status quo forces people to learn everything on their own or sacrifice all autonomy on a faceless centralized finance platform. Understandably, many people do not want to venture into an asset class when they have little idea of what makes it tick.
The solution is not to hurl under-informed investors onto exchanges to make guesswork out of their portfolios but rather to provide opportunities to learn about tokens, blockchain technology and best-practice operational security. It is the responsibility of brokerages and other businesses in crypto to provide honest and reliable information when possible. Personalized education can enhance the learning experience making cryptocurrency more user-friendly while removing the barrier of fear when entering the crypto space.
The next barriers to participation are security concerns, price volatility and regulatory uncertainty. Hacks and breaches are constant threats for everyone dealing in crypto. The first step in protecting oneself is to recognize and avoid scams. It is often hard for beginners to identify a legitimate crypto investment from fraud, but a dedicated, personalized broker can serve as a guide rail, steering investors away from phony offerings.
However, scams aren’t the only concern for digital asset holders. Some of the most damaging cyber attacks happen on online exchanges. These hubs for crypto trading are especially prone to hacks because of the inherent risk of holding large amounts of assets in hot wallet solutions. Securing one’s funds in storage is critical to successful investing and wealth management.
Cryptocurrency is an exciting but speculative asset with high volatility. Investors should consider whether crypto fits their portfolio goals, risk profile and their own convictions before gaining exposure.
Blockchain technology holds the key to sustainable development for the world’s poorest people. The 2008 Bitcoin white paper led with a collective mission to advance financial inclusion and economic equality. But inaccessibility and a lack of user education make it impossible to achieve this goal. Recent popularity growth in cryptocurrency can be attributed to widespread availability. The same cannot be said for the understanding of crypto investment fundamentals, which is the next step for achieving mainstream success.
In recent years, access to crypto has exploded. More and more traditional finance companies and platforms are entering the space, further legitimizing the asset class and accelerating its future. But if investors join the space without understanding their options or having proper guidance, it may ultimately create setbacks for individuals as well as institutions.