AAVE is one of many cryptocurrencies available for investors to buy.
Its value has fluctuated wildly in recent months though, so it’s important to know the risks. We explain what you need to be aware of.
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Whether you’ve already invested or not, keep in mind that making money through cryptocurrencies, like any investment, is never guaranteed.
Cryptocurrenices are highly volatile and their values can make large swings with no notice.
In other words, it’s important to never invest more than you can afford, if anything, and to not put cash into something you don’t understand.
Newer cryptocurrencies are also riskier than more established ones, such as Bitcoin, and make you more open to scams and fraud.
5 risks of crypto investments
BELOW we round up five risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
What is Aave?
Aave is a decentralized finance (DeFi) protocol that allows people to lend and borrow cryptocurrency.
DeFi is complex but it essentially aims to disrupt the finance world to enable people to lend in peer-to-peer networks, without needing a bank.
Lenders are said to earn interest by depositing digital assets into specially created pools with Aave.
Borrowers can then use their crypto as collateral to take out a flash loan using this liquidity.
Aave was originally known as ETHLend when it launched in 2017, but then rebranded to its current name in 2018.
The Aave (AAVE) tokens are used to power the network, and they launched in October 2020.
How much is Aave worth?
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The value of Aave is currently sitting at $321.94, up by 3.62% over the past 24 hours, according to CoinMarketCap.
In comparison, it hit its highest ever level on May 18 when it reached $637.43, meaning it’s almost halved since then.
At the beginning of 2021 on January 1, Aave was worth a much lower $86.55.
The price swings are evidence of the extreme volatility with cryptos.
Charlie Barton, investment specialist at comparison site Finder, told The Sun: “Like any cryptocurrency, Aave is very volatile, regularly swinging up and down by large percentages.
“Anyone thinking about investing in Aave must do their own research, and only invest what they’re comfortable losing.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, added: “These are dark pools of lending, with no regulation but huge risk.
“It’s a speculative twilight world, where currencies lent out can soar or fall in value, mirroring chatter on social media forums.”
We explain whether Ethereum could overtake Bitcoin as the world’s leading cryptocurrency.
Last week, Bitcoin was blasted as having “no inherent worth” by the world’s biggest hedge fund boss despite its price rocketing by 20%.
Meanwhile, the price of Mooncoin has fallen recently after soaring to its highest ever level in May.
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