With cryptocurrency’s burgeoning performance in the financial market today, more and more people are jumping on the trend to try their luck in the world of cryptocurrency investment.
If you are interested in cryptocurrency investments, then here are a few pros and cons that will help you weigh your options.
Pros of investing in crypto
Crypto has recently been rising to popularity over the last few years. Even a billionaire like Elon Musk views it as a good investment when he invested US$1.5 billion in Bitcoin. Here are the advantages of jumping on the crypto investment craze:
Pros #1: Transparency
Cryptocurrency transactions are stored in an open ledger where anyone can access the data anytime. As such, it is completely transparent compared to other transactions that require an intermediary. This is a step in the right direction for investors who want to monitor their investments with no interruption.
Pros #2: Accessibility
Cryptocurrencies make it possible to transact with another party wherever you are in the world. It doesn’t even require a laptop or computer. You can manage your transactions and access your finances through your phone and make financial decisions in real-time.
Pros #3: Liquidity
One of the first things you should take notice of as an investor is the liquidity of your investment. In cryptocurrency, liquidity is described as the ease with which you can turn your crypto into cash. The more liquid your currency is, the better since you can pull out your investment whenever you feel like it’s at risk.
Major cryptocurrencies like Bitcoin are generally more liquid than lesser-known cryptocurrencies. This makes major cryptocurrencies more desirable. You can trade your cryptocurrencies at exchange sites like Coinbase, Kraken, and Bitstamp.
Pros #4: Huge upside potential
What attracts most investors to crypto investments is the huge upside potential. An example of this is Bitcoin, which peaked at US$52,965 in the market as of writing.
Since cryptocurrency is still being developed in the global financial market, there is no telling how higher the upside can be in the future.
Cons of investing in crypto
Investments often present a bump in the road here and there. Take a look at a few disadvantages in crypto investments:
Con #1: Security concerns
Security breach is one of the top concerns of those who want to invest in crypto. Since it is a digital investment, there is a possibility of getting hacked and compromised by cybercriminals.
Keep in mind that cryptocurrencies are accessed via private keys given when you create a cryptocurrency wallet. This means that protecting your private key should be your main concern as an investor. Utilizing cold storage wallets are one way you can prevent potential breaches on your account.
Con #2: High volatility
Cryptocurrencies tend to be more erratic than other assets such as golds and commodities. It has had a few violent ups and downs ever since it was introduced in the financial market. An instance of this is the price peak of Bitcoin starting with a price of US$0.08 in 2010 surging up to US$11,500 in 2017.
The high volatility of cryptocurrencies acts as a double-edged sword. Everyone loves the upside volatility, but when the price of cryptocurrencies falls, it becomes a drawback for your investments.
Con #3: Limited application
Cryptocurrencies are currently utilised by several online markets and platforms, however, not all countries recognize cryptocurrencies as a legitimate currency. Only recently, India announced its plans to ban all private cryptocurrencies in the country with Nigeria following soon after announcing a crackdown on crypto transactions.
Be that as it may, there are some countries that view cryptocurrencies as the future of cross-border transactions. America and Japan are some of the countries that use cryptocurrencies a lot for payment and trading purposes.
Cryptocurrency: Is it a good investment?
Just like any other investments, cryptocurrencies have its own advantages and disadvantages. The primary advantage of investing in cryptocurrency is the high upside potential that can make your investment worthwhile.
Security concerns in crypto exchange can easily be dealt with by carefully managing your account and straying away from dubious investment offers and organizations, especially inconspicuous entrepreneurs in ICO investments.
Meanwhile, the high volatility of crypto can be an advantage for you if you know how to read the market. Conducting thorough research about crypto investment tips and the best coins to invest in will help you reap great returns.
As for the limited use of cryptocurrency, it is still a growing market that shows great potential in being at par with fiat currency.
Investment in cryptocurrencies is a digital gold rush that can make and lose profits in a blink of an eye. However, those who are willing to do their research about cryptocurrencies and stomach the rollercoaster ride of its market will surely profit from their investment.
Crypto investment options to consider
If you’ve decided that investing in cryptocurrencies is worth the risks, then it’s time to choose the best investment options that will give you the highest returns. The following are the most popular ways to invest in cryptocurrency:
- HODLing
HODLing is one of the easiest ways to invest in cryptocurrencies. It is described as the process of buying cryptocurrencies and holding on to it until it reaches a high price in the market. This is the safest investment option since it doesn’t involve trading.
- Day trading
If you’re still anxious about investing in crypto, you can try day trading for short term investments. This type of investment strategy involves keeping cryptocurrencies for a short period of time and selling them off before the day ends to make a quick profit. You can buy your cryptocurrencies on exchange sites and trade them on the same platform.