RISK ASSOCIATED WITH CRYPTOCURRENCY

Investors and the media are showing an increasing amount of interest in cryptocurrencies. Due to their additional advantages, including diversification and hedging potential, they are being seen as a new class of assets more often. Cryptocurrencies can still be dangerous investments, despite the fact that this does not exclude it. Numerous investigations at varying risk levels were conducted in this setting. Our chapter seeks to reconcile different views on risk across cryptocurrencies and fills up this gap. In particular, we offer a thorough analysis of the key risks that crypto traders should take into account, particularly the risks associated with technology, fraud, the law, markets, liquidity, and the COVID-19 epidemic. The primary conclusions demonstrate that every technological failure tends to increase people’s uncertainty and mistrust about bitcoin technology. Through fraud schemes and phoney trade volumes, this fact may be further tainted. The cryptocurrency’s legal foundation is also still up for debate. There is a huge risk contagion across large-cap cryptocurrencies, making these crypto-assets riskier than fiat money in terms of market risk. Therefore, there is a strong correlation between market efficiency and liquidity in the context of cryptocurrencies since price movements might affect market liquidity. Ultimately, it becomes clear that the COVID-19 outbreak had a significant impact on the cryptocurrency markets. For investors, regulators, and policymakers, our chapter highlights current problems.