Weaknesses of Cryptocurrency Trading and the Difference with Mutual Fund Investing

Weaknesses Of Cryptocurrency Trading And The Difference With Mutual Fund Investing

reddit.garudatechno.id – Cryptocurrencies or also known as cryptoassets are very popular in Indonesia for investment. Several crypto assets such as Bitcoin, Ethereum, Ripple, Tether and Doge have risen in value since the beginning of this year and are providing benefits to their holders. What about the risk aspect?

In Indonesia, according to the Ministry of Commerce’s Commodity Futures Trading Regulatory Agency (CoFTRA), cryptocurrencies are commodities traded on futures exchanges. Although prohibited as a currency or a means of payment by Bank Indonesia, crypto assets can be used as investment tools and can be traded.

Crypto assets which are also often called cryptocurrencies or crypto money are advantageous for quick trading (trading) because they can be carried out all day without holidays (24/7). Also, a well-known public figure such as Tesla owner Elon Musk reportedly owns the cryptocurrency asset Doge, so the trigger value is going up when compared to the dollar.

The value of Bitcoin and other cryptocurrencies can quickly increase without limitations for digital assets due to blockchain technology. Blockchain technology is a system registry information that makes it impossible to change, hack or cheat, so there is no need for agencies or authorities to supervise and set the rules.

However, people interested in crypto assets need to understand the risks or disadvantages of this currency as an investment. Here’s the review.

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Cryptocurrency trading weaknesses

Weaknesses Of Cryptocurrency Trading And The Difference With Mutual Fund Investing
Weaknesses of Cryptocurrency Trading and the Difference with Mutual Fund Investing

very high risk

The value of Bitcoin and other currencies can only increase by hundreds of percent indefinitely. However, the risk of disability is also not limited. It could be that yesterday’s lucky day investor or trader may be careless due to buying and selling crypto assets.

This is different from investing in capital markets such as stocks or mutual fund shares. On the Indonesia Stock Exchange, the maximum decline of shares in one day is 7% and will immediately trigger automatic rejection. If the decline lasts for days, the stock exchange authority may apply a temporary suspension of trading (suspension) so that the loss of investors’ shares or mutual fund shares can be limited.

Nothing fundamental to analyze

Cryptocurrencies like Bitcoin, Ethereum, Ripple, Tether and Doge are not currencies like rupees or dollars. So, even though it is called a currency or currency, cryptocurrency is not a currency that has basics like a country’s economic conditions, interest rates, and other macroeconomic data.

Crypto assets also cannot be analyzed in terms of fundamentals, as well as the shares of the issuer that the company owns revenue, business operations, earnings and dividends. As for mutual funds, you can see the contents of the portfolio listed in the fund’s datasheet. Therefore, it is very difficult to predict and analyze the valuation or fair value of Bitcoin and other currencies.

No Authority Body

As mentioned earlier, crypto assets exist because blockchain technology allows all transaction data to be automated. As everything is governed by the blockchain system, there is no longer any human authority that makes the rules or can restrict trade. This means there is also investor protection or customer service, which listens to people’s complaints if no one goes against the crypto asset.

This is certainly different from stocks or mutual funds that are overseen by the Financial Services Authority (OJK). If the action moves unreasonably or the company violates the provisions, OJK may issue a warning. Mutual funds and investment managers that do not comply with the rules may also be subject to FSA sanctions.

At this time, Coftra only oversees traders of tradable crypto assets and cryptocurrencies in Indonesia. CoFTRA has recognized up to 229 types of cryptocurrencies that can be traded in Indonesia and there are 13 crypto asset trading companies currently registered with CoFTRA.

Now, after knowing the weaknesses or risks of crypto assets, we as smart investors need to think again to decide to invest in these digital assets. We may also choose investments with lower or measured risks, such as mutual funds.

A mutual fund is a pool of investor funds managed by an investment manager for inclusion in financial assets such as stocks, bonds and money markets. Mutual funds are investment officers overseen by the FSA.

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