One of the fastest ways to get into an awkward conversation is to try and introduce people in your real life to crypto.
They will instantly start looking at you as either a scammer, gambler, or psychopath who needs to slow down and probably get professional help.
Why do people seem so hostile towards crypto and what can you do about it?
That’s what we will be discussing in this article.
6 reasons why people are scared of crypto
Let’s dig into each of them below.
1. Volatility
The cryptocurrency market is highly volatile and it’s not surprising to see a -99% drop or a +500% price increase in a day due to any reason.
Most people can’t handle such extreme volatility. Even a 5% drop is a massive loss for most people, let alone 20% to 99% in a single day.
In traditional finance, a 100% profit in a year is considered a genius and extremely rare outcome. But in crypto, a 100% gain in a year can mostly be considered poor performance.
That is because, in crypto, it’s common to get a 100% gain in under a day, week or month on some random tokens.
Similarly, you can lose your entire portfolio very fast if you’re not careful or know exactly what you’re doing.
This level of volatility, combined with other factors below is unbearable for most people. And that’s why they’re scared of crypto.
Unfortunately, there’s nothing anyone can do about the extreme crypto volatility.
It will reduce and probably go away entirely as more money enters the market and liquidity increases.
However, some microcap tokens will continue to see extreme volatility. You can avoid investing in such tokens except you know exactly what you’re doing.
And focus more on investing in large-cap coins with sufficient liquidity to avoid extreme volatility to some extent.
2. Security
Almost every other week or month we hear how hundreds of millions of dollar worth of crypto were stolen or lost through one exploit or another.
This is due to the poor and suboptimal security practices of many crypto platforms or protocols.
In fact, there have been protocols that permanently locked away deposited coins due to one bug or another.
Furthermore, many projects don’t take security seriously.
They rush to launch for one reason or another with no proper security audit or testing before going public.
And then due to one bug or another, an exploit happens and users who have funds in the protocol lose their money.
This poor to non-existent security practices scares away most people and especially serious investors from investing in the market.
Until the industry becomes more secure, many people will continue to avoid investing in crypto or DeFi for the legitimate fear of losing their money.
3. Scams
Crypto is almost synonymous with scams and illegal activities. Whether that’s entirely true or not is immaterial, the impact of such perception is real.
Every day one project or another shuts down, gets abandoned, or the developers rug the investors and disappear with their money.
These stories are everywhere and it scares the hell out of people from investing in crypto.
The situation is worse because it’s very hard and almost impossible to trace and bring these scammers to justice because they’re mostly anonymous.
Even those who’re not anonymous will scam their users in very subtle ways that are hard or impossible to prove.
As an investor, the best you can do is to learn about all the scam formats they use and make sure to avoid them.
Furthermore, you need to keep yourself informed and updated as these scammers are constantly evolving and coming up with new formats or strategies to steal your money.
4. Lack of education
Never invest in something you don’t understand ~Warren Buffet
Most people avoid investing in crypto because they don’t understand it and fear that they will lose their money due to ignorance of the technology and how it works.
This fear is justified and is in fact a wise thing to do.
You can help such people by educating them or showing them how to do their own research and learn about the industry or specific projects by themselves.
Whenever they feel they’ve gained sufficient knowledge to make informed decisions, they can test the market with some amounts and grow from there.
5. Market manipulation
The crypto market is heavily manipulated by different actors. From whales with deep pockets to project developers or industry leaders.
The market is constantly being manipulated with impunity for profit by selfish and greedy influencers, whales, developers, and supposed industry leaders.
This is mostly because crypto is not regulated in many countries or regions, and due to the nature of cryptocurrencies, it’s hard to trace and prove these offences.
Examples include insider trading, pump-and-dumps schemes, wash trading, fake news, and even outright lies.
Thankfully, the law is catching up gradually and regulatory clarity is underway to bring some sanity into the industry.
This will pave the way for the public and institutional investors to invest in crypto with some level of confidence and protection from bad actors.
This brings us to the last point.
6. Poor regulation
Crypto is mostly unregulated in most countries.
There are institutional, accredited and even retail investors that want to invest in crypto but can’t due to regulatory challenges.
The law on how and even whether they can invest in a new and risky asset class as crypto is non-existent, as such they can only wait for regulatory clarity.
Furthermore, the SEC (securities and exchange commission) is yet to finalise what constitutes a security, commodity, or currency in its classification of cryptocurrencies.
These uncertainties due to zero or unclear regulations are making many people slow down with the idea or plans of investing in crypto.
Conclusion
Of the 8 people on earth, it is estimated that only a few hundred million are currently invested in crypto.
That’s about 4% of the entire world. Showing that YOU are both brave and early to be here already.
We’re this few because most people are too scared to handle the 6 negative factors impacting the market discussed above.
What other reasons do you think scare people from crypto? Share with us in the comments section below.