Ethereum is the most capped cryptocurrency on Coinmartketcap.com, second only to Bitcoin. With a current cap value of $86 billion USD and a unit price of $1.030.70 USD per ether, the digital currency is arguably a big-time mover in the crypto market. However, with the track record or enviable records it possesses, should one hold the coin for a long time?
As a potential or actual Ethereum investor, there are risks associated with the coin that you must be aware of. Though I don’t want to sound like a pessimist, we need to be realistic and prevent emotions from getting hold of us when making investment decisions. Knowing the potential risks associated with Ethereum investment will enable you to make the right decision as well as put the necessary safety measures in place while you buy and hold the cryptocurrency. Here are some of the risks of holding Ethereum:
The discovery of an accidental bug on the Parity Wallet is one of the worst security issues to ever hit Ethereum. CNBC reported that “vulnerability” was discovered on Parity, which enabled users to change code and take ownership of wallets that is not theirs. According to the news site, one person was able to suicide the wallet, deleted its code and froze the entire Ether tokens contained in it. Do you know what? The code wipes out simply means that ethers valued at over $280 million were locked. This has prevented a lot of users from moving their digital coins out of the wallet. Only time will tell if the coins would ever be recovered.
One other challenge that long-term holders of Ethereum are exposed to is price volatility. Nobody can say with certainty that he/she knows exactly what the price of Ethereum or other cryptocurrencies could be a minute from now. From time to time, prices change drastically either as a result of market forces or due to external influences beyond the control of the market.
On 21 June 2017, Ethereum experienced a flash crash on GDAX exchange, which saw the price of the cryptocurrency plummet from $319 USD to 10 cents in a matter of seconds. The loss was said to have been triggered by a multimillion sell order which pushed the price from $317.81 to $224.48, leading to about 800 stop-loss orders. Though the price quickly recovered, a lot of investors lost their ether.
With the rise in value of cryptocurrencies (Ethereum inclusive), more and more cryptocurrency wallets are being targeted by cyber criminals who are poised to do everything possible to hack accounts and take possessions of what others have labored for.
According to Reuters, about 33% of cryptocurrency exchanges and platforms have been hacked, forcing half of the services to close their activity due to virtual insecurity. Though almost all wallet services claim to be safe, you must be aware that none can give you 100% security. Keeping your ether in online wallet is quite risky; it’s better to transfer them to an offline hardware wallet. This is much more secure.
In another situation, a hacker was able to explore susceptibility in Parity multi-signature wallet on the Ethereum network and drained three massive wallets of Ether worth over $31 million within some minutes. The white-hat hackers from the Ethereum community quickly mobilized themselves, analyzed the attack and discovered that the attack was irreversible even though several accounts were still prone to attack. The white hackers immediately hacked the remaining accounts and drained them to prevent the hacker from getting access to the rest $150 million. When it became safer to do so, the white hackers gradually returned the accounts to the legit owners.
Quantum Computer Attack
There is the probability that quantum computers could attack Ethereum wallet and take over ethers (just like Bitcoin could be attacked too). According to a post on Citowise, quantum computing could outperform the fastest supercomputers in the world, even a combination of all computers that were ever made. In other words, should there be any quantum computer attack, Ethereum could be affected thereby making investors to lose their hard-earned income.
The DAO Attack
The issue of the DAO attack is still fresh in everyone’s mind. The DAO did an ICO that raised over $117 million worth of Ether but was soon to run into troubled waters as an unknown attacker exploited a vulnerability in the system on 18 June 2016, to drain more than 3.6 million Ether into a “Child DAO” with similar structure to the DAO. This led to ether falling in price from $20 to under $13 at the time. The situation was only remedied by creating a fork of the DAO. Similar attacks in the future could prove potentially serious and rob long time investors of their Ether.
Investing in Ethereum is a great financial decision but one must be aware that, like any other investment, especially for an online business, the possible risks are quite high. Therefore, it would be wise to secure your ether using hardware wallet if you are to hold your coins for a long time.Trade on ETH/USD
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future
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