The cryptocurrency sector contains some of the riskiest assets in the financial markets. While many crypto assets have given incredible returns over the years, some carry higher risks than others. Some cryptocurrencies have even led to people losing out entire life savings. Let’s look at two types of cryptocurrency assets you can avoid.
2 Types Of Cryptocurrency Assets You Can Avoid
The first type of crypto assets that you can do without are memecoins. Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (PEPE), etc., are meme cryptocurrencies that have massive fan followings. However, memecoins do not carry much utility. Moreover, they are among the riskiest assets in the market. While DOGE, SHIB, and PEPE have given good returns to early investors, these cryptocurrencies have lost substantial value over the years. For example, SHIB climbed to an all-time high of $0.00008616 in 2021, but has since fallen by more than 92%, according to CoinGecko data. Dogecoin (DOGE), the original meme cryptocurrency, hit an all-time high of $0.7316 in May 2021. However, the coin’s price has dipped by 85% since its peak.
Another type of cryptocurrency you could avoid is algorithmic stablecoins. While stablecoins have gained substantial momentum over the last few years, algorithmic stablecoins have come under significant flak for not have reserves, but instead relying on algorithms to main its peg to the fiat currency. An excellent example of an algorithmic stablecoin failing is the collapse of Terra-Luna and its UST stablecoin in 2022. People lost entire life savings during the collapse, and founder Do Kwon was taken into custody. Stablecoins that have actual reserves to back their inflows are the ones to go for.
Also Read: 3 Events That Could Rock Your Crypto Investments
While the cryptocurrency sector has seen substantial growth over the last few years, it is extremely important that investor take necessary steps to protect their capital. The sector is plagued with high volatility and prices swing cyclically ever so often.
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