The Pros and Cons of Investing in Cryptocurrency
These days, cryptocurrency is everywhere. The concept saw initial success in 2009 as an answer to the financial crisis and has had a resurgence in popularity with the current recession. Bitcoin is still the most well-known and valuable cryptocurrency, but in the 12 years since it was launched, more than 4,000 others have emerged. Once just a topic for people who worked in the tech world, cryptocurrency has gone mainstream. The concept has the potential to change how financial resources are managed because it isn’t controlled by one authority such as a bank or government entity. Â
When it comes to investing in this intriguing trend, some see it as a boom for the future of online commerce. Others believe it’s a bigger risk than anything else you might invest in. So what are the risks and dangers? What are the pros and cons of investing in cryptocurrency? Â
Before you open your wallet, there are many things to consider. Here are a few. Â
Pro: Potentially huge returns in a short period of timeÂ
Given their rise in popularity, cryptocurrencies can offer very large returns very quickly. Some people have seen their investments more than triple. The return can come very quickly too. Since they’re newer and riskier, it’s typically advised to use these investments as opportunities to raise quick cash for venture capital investing and other ventures. Cryptocurrencies have a great chance of delivering much faster than other investments. Â
Con: Potentially huge lossÂ
All investments carry risk, but cryptocurrency is more precarious than others. Since this is an impactful and relatively new trend, it’s difficult to establish patterns or predict where the market will go. Don’t invest in this if you want a sure thing. Â
Pro: LiquidityÂ
Unlike with other startup investments, cryptocurrency has almost immediate liquidity, meaning it can be turned into cash fast, without you having to wait around for an acquisition or IPO. Â
Con: ConfusionÂ
Though cryptocurrency has gone mainstream, the concept itself remains extremely technical. If you’re not a tech expert, understanding how it works could be very confusing. If you want to learn, it could take up a lot of your time. There’s a definite risk in investing in something when you don’t fully understand what it is
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Pro: 24/7 TradingÂ
Unlike other investments, cryptocurrency can be traded whenever others are active. This is a terrific advantage because it allows you to trade with people all over the world, making your potential for return much higher on a global scale
Con: Resource shortagesÂ
Cryptocurrency startups are picking up steam, but the rules of a fledgling business still apply. If a cryptocurrency ICO doesn’t raise enough to become profitable, it goes under, and your money is gone. Though cryptocurrency is popular, there is a tremendous amount of competition, so the risk of failure is theoretically larger. Â
Pro: Accessible trading platformsÂ
With the popularity of trading cryptocurrency, it was necessary to create platforms that were simple and intuitive. Programs to help you plan and trade are aplenty, free or cheap to use, and easy to set up to start trading and keep track of your funds. They also give you the most up-to-date information on market trends. Â
Con: Risk of being scammedÂ
This is perhaps the most difficult and potentially devastating risk of investing in cryptocurrency. Given how relatively new the industry is, and the fact that most people do not fully understand it, it is rife with scammer potential. A notable example is OneCoin, which was a Ponzi scheme that promised to be bigger, better, and easier than Bitcoin. The $15 billion scam defrauded millions of people and its owner disappeared. In less extreme situations, investors can still find themselves in the hands of inexperienced and inept managers, so it’s important to research the company you’re investing with before getting involved. The old adage still rings true here: If it seems too good to be true, it probably is. Â
What to do? Â
The pros and cons of investing in cryptocurrency almost cancel each other out. The bottom line is, while it may seem like a trendy and exciting new opportunity, it should still be researched and carefully thought out. Spend some time learning about cryptocurrency in detail, talk to other people that are familiar with the practice, and watch for highs and lows in the market. Carefully consider the options before jumping in, and seek the advice of a professional if you plan to invest a lot of money. Caution is never a bad thing when it comes to your bank account and your future. Â
Still, cryptocurrency has the potential to make big changes in how world economic practices work, and so investing in it with a solid understanding and all of the tools you need could end with a terrific result. If you are interested in more cryptocurrency information, check out this article or subscribe to our newsletter below.
