Why are investments in terra connected to risks and uncertainty?
When you’re trading cryptocurrencies and terra, there’s a risk you could lose some or the entirety of your investment. This is because cryptocurrency is an unregulated asset. This means that there’s no central authority to protect you as a consumer.
If you have money in a bank, and the bank goes bankrupt, your money is protected by a central authority: In Denmark, that authority is Garantiformuen , who covers deposits equivalent to up to 100,000 euro.
But if you lose your terra coins as a consequence of a crypto platform going bankrupt, you’re not protected.
That’s one of the reasons why terra is an uncertain investment . You don’t have access to the same safety net here, because cryptocurrencies still are unregulated assets as of 2022.
Besides that, terra and other cryptocurrencies are very volatile assets . That means that the prices of them can rise and fall very quickly in value from one day to the next. The more volatile an investment is, the more uncertain it is. The same goes for any other assets such as stocks or real estate investments.
If you’re considering buying a house for example, you would be more cautious of purchasing it if you knew that the price of the house potentially could lose up to 100% of its value from one day to the next. But at the same time, there’s a risk that the house could be worth 10 times as much the next day.
Tip: Terra’s history is filled with large rises and falls. Read about them here .
That’s why you need to consider whether or not the risk of large drops in the rate is in line with your willingness to take risks.