Why Are Investors Afraid of Cryptocurrencies?

advice Nov 06, 2019

Often, investors’ greatest fear is crypto. As cryptocurrency can’t be touched physically, it makes sense that investors would be afraid of the uncertainty that crypto brings to the table. Also, it has an unpredictable value that can rise or fall drastically overnight.

Cryptocurrency was created anonymously through a methodology that we stopped trying to understand. Unfortunately, its legal status is confusing, and its reputation is controversial.

When summing up these descriptions, investing in crypto sounds like a bad idea. However, crypto-adoption continues to grow worldwide. For instance, the Cambridge Centre for Alternative Finance recently reported that the number of verified crypto users almost doubled in the first three quarters of 2019, rising from 18 million to 35 million users.

Seemingly, fear is innate to all things new, as people tend to fear the unknown. However, the more you learn about a new topic, the more you understand. Eventually, your fears dissipate, and they are replaced by a feeling that this idea may be worth your attention.

This same concept can be applied to cryptocurrency. In the spirit of recent Halloween, let’s discuss some of the different types of “cryptophobias” we have observed and start fighting our crypto-fears with CoinLoan!

“All crypto startups are scams and Ponzi schemes.”

In 2017, companies could add “blockchain” or “Bitcoin” to their brand’s name to drive up their stock prices. However, 2018 was a hard year for crypto. More than 80 percent of ICOs failed to fulfill their 2017 promises and were identified as scams.

Due to this chain of events, it is no wonder why 2019’s investors view references to crypto as red flags. Hence, our “favorite” bias comes down to a single question: “How can you prove that CoinLoan is not a scam?”

In October 2017, we started working on our project during a time when nobody understood the concept of using crypto as collateral. A year and a half later, the CoinLoan crypto lending platform opened for users.

With the support of our community, we overcame 2018, which was a disastrous year for the crypto world. Moreover, CoinLoan grew its userbase, improved its lending platform, and developed new products.

If our background doesn't convince you of our legitimacy, let's see if the following statements can:

  • CoinLoan operates within a legal framework. We’re a licensed and regulated financial institution, making us a reliable partner within the financial sector.
  • For each loan, we generate a “Loan Agreement” that you can bring to your bank or tax office.
  • We stick to Anti-Money Laundering (AML) and Know Your Customer (KYC) policies to fight money laundering and the funding of terrorism.

“Lending against cryptocollateral is bad because crypto fluctuates unpredictably.”

The question feels very timely, given that crypto prices are seemingly on a roller coaster recently. Our answer is simple: CoinLoan was created to ride this roller coaster.

Crazy price fluctuations of loan collateral are nothing unusual for us; they are the reality and the basis of our work. From conception, CoinLoan’s business model was built to deal with volatility, and in 2019, our model proved its effectiveness.

How does CoinLoan account for fluctuations? Well, every loan is overcollateralized. On CoinLoan, users can borrow no more than 70% of the value of their collateral.

Here, the reserved 30% gives us the resources to take measures in case of market fall. Thus, when necessary, CoinLoan can sell a loan’s collateral and returns the funds to the lender with earned interest automatically.

This system, in a nutshell, means that upon loan issuance, crypto-volatility is no longer a concern for lenders. Rather, the risk is put on the platform and borrowers.

Using this system, CoinLoan’s lenders remain safe, regardless of the market’s behavior. If you want to learn more about CoinLoan and how we battle volatility, this blog post is for you.

“Crypto activities are shadow and illegal.”

Another reason people are afraid of cryptocurrency is that the crypto industry remains relegated to a niche status due to a lack of regulation. However, If you think that cryptocurrency is banned worldwide, see Figure #1 below.

Figure #1: Map of Bitcoin legality. Source: Wikipedia

In Figure #1, countries with a “full or partial prohibition” on Bitcoin usage are red, and all green countries have ruled Bitcoin as “legal to use.” Pink and yellow indicate a “contentious” stance on Bitcoin based on interpretations of old laws and legal restrictions, respectively. You can read about the legality of Bitcoin by country, according to Wikipedia, here.

Today, the number of countries agreeing to accept crypto is continually growing.  Moreover, mainstream uses of crypto are continuously emerging, and ambitious projects of big brands are starting to use crypto.

For example, Facebook wants to be a leader in the crypto industry with Libra stablecoin; Ernst & Young, one of the world’s largest business services firms, launched a cryptocurrency tax calculator; and, IBM launched a blockchain-based global payments network.


That's it! We hope this article inspired you to fight your “cryptophobias.” Please let us know about any other fears you have about crypto, and we’ll cover them in a future article! 😉