Cryptocurrency has been a highly spoken about topic in the financial world. Due to the currency’s decentralized nature, it has been an appealing form of investment in addition to this form of currency’s potential of high returns.
Since the first release of cryptocurrency in 2010, this form of investment has been highly lucrative. In this article we are going to explain the upsides and downsides in investing in cryptocurrency and whether this form of investment aligns with your desired investment goals.
What Is Cryptocurrency?
Cryptocurrency is a digital, decentralized currency which is often backed by blockchain technology. These currencies function similarly to fiat or traditional currencies since they can be used to purchase goods and services.
However, there is no financial intermediary for crypto and they rely on blockchain technology to regulate it. Blockchain technology is a system that makes it extremely difficult for those to hack or infiltrate its information.
Additionally, there have been more than 10,000 cryptocurrencies since its first release and the demand for these continues to grow.
How Does Investing in Crypto Work?
How to invest in crypto is similar to any other other form of investing. However, there are some trading platforms that are specifically designed for cryptocurrencies. These platforms give a wider range of cryptocurrencies unlike other trading platforms who often only hold a select few.
Is Crypto a Safe Investment?
Any type of investment can be risky and investing in cryptocurrencies is no different. Investing in crypto can have a unique set of problems and is susceptible to hacking.
However, crypto trading platforms try to provide additional security for investors due to this issue. Using a trusted platform like Coinbase can help ensure the security and safety of your crypto transactions. Read more into any platform’s fine lines to see how as an investor you are being protected.
Is Crypto Good for Long Term Investing?
It is dependent on the type of cryptocurrency you choose to invest in to see if it is a good fit for long term investing. Some coins are highly volatile which can be a good indicator of a short term investment however others, such as Bitcoin, have consistently risen over the years.
By doing more research on the currencies themselves, it is possible to dictate whether it would be a short term or long term investment.
Is Crypto Worth Real Money?
Short answer, yes. Cryptocurrencies can be converted into fiat or traditional currencies if an investor wishes to withdraw it. However, investors should look into a coin’s liquidity to see if the coin can be converted into real money.
Is Investing in Crypto Worth It?
Cryptocurrency is a great investment for those who wish to diversify their portfolio. This type of investment can be a great opportunity for those who are risk averse and wish to get high returns.
Additionally, by owning cryptocurrency it can help hedge risks that arise from economic downturn and or inflation.
What to Keep in Mind with Investing in Crypto
Despite cryptocurrencies benefits, there are some things to consider prior to investing. These concerns include regulation, hacking, and exit scams.
Is Cryptocurrency Regulated?
One of the main selling points of cryptocurrency is that it is a decentralized system. This comes with perks, such as the likelihood to be more stabilized and survive economic downturns in comparison to fiat currencies, however there are some downsides to highlight. This includes the high susceptibility to volatility.
Errors and Hacking
Since crypto is not regulated this can lead to hacking and potential errors within crypto transactions or accounts. However, these hacks that have been executed are getting cracked down on.
Additionally, trading platforms try to take extra preventative measures to insure the safety of their users from hacks.
An exit scam is when early investors pull out their funds from the market in order to profit off of artificially inflating a cryptocurrency’s price. How this works is that these early investors who have a lot of a specific crypto try to promote it through marketing stunts to increase the price.
By doing this, once enough investors have invested in this coin, these early investors will pull out and profit from this tactic. This type of scam is common within cryptocurrency due to “meme coins”.
Advantages of Investing in Crypto
There are a plethora of advantages for investing in crypto. One of the main advantages is the potential for high returns and its diversifying attribute.
Additionally, it is a great investment to use for international transactions since it eliminates foreign transaction fees. Lastly, it has great liquidity and can lessen the risk of payment fraud due to blockchain technology.
Disadvantages of Investing in Crypto
However, along with its upsides, there are disadvantages to investing in crypto. Since crypto is susceptible to high volatility, there’s room for the possibility of major losses.
Additionally, since it is decentralized, sometimes crypto is utilized for black market activity. Plus, due to this, there is not a possibility of refunds with crypto.
Is It Better to Invest in Crypto or Stocks?
It is dependent on what your investment prerogative is. Since crypto is very volatile this can be seen as daunting for those who are risk averse.
In this scenario, stocks would be seen as a more stable option for investors. However, crypto is a rising and attractive investment that more and more investors are looking into. Due to this, crypto is a great opportunity for investors to diversify their portfolio with.
Why Should I Invest in Crypto?
Crypto is the future of money, and due to the unique nature of cryptocurrencies, it is a great opportunity for investors who wish to diversify their portfolio. In short, investing in cryptocurrency is a great asset to have.
If you wish to learn more about cryptocurrencies and where to start your investment journey, click here to read more about Coinbase and its educational resources.