With the boom of Bitcoin and many other altcoins, more people are rushing to get into cryptocurrencies investment. However, before you get into trading these cryptocurrencies, keep in mind that this tradiing is arisky investment. The same way you can make a fortune trading cryptocurrencies, you can also lose out a lot while dealing with them.
With the emergence of the Bitcoins in 2009, the cryptocurrencies market can still be considered as a young and volatile market. The question of whether cryptocurrencies make a good investment are highly dependent on your knowledge of the cryptocurrency market.
In this article, we will provide you with a general overview of the advantages and disadvantages of investing in cryptocurrencies.
How can you invest in cryptocurrencies?
Before we get into the pros and cons, you need to know that there are several methods to invest in cryptocurrencies. If you are just starting out, you can choose to buy the ones available on a cryptocurrency market exchange or use Coinbase which functions as a wallet and an exchange simultaneously.
Learn more about the pros and cons of the trading option in this guide.
As we are delving deeper into the analysis, keep in mind that cryptocurrencies have a highly volatile market and you need a lot of resilience to succeed in this marketing.
Keep it simple when you are just getting started in the cryptocurrency market. Stick to Bitcoin, Litecoin, and Ethereum as they are the least risky coins due to their long-standing reputation.
Pros of cryptocurrency
High opportunity for growth
The inception of Bitcoin in 2009 means that the cryptocurrency market is still young and there is plenty of room for growth. The price of Bitcoin has quadrupled in early 2017, much to the delight of many investors who got in the market early.
Many investors project that the Bitcoin price can climb up to $15k. The growth factor is also enhanced by the fact that it can stand at par with physical money as an important form of exchange in the near future.
Very transparent market
The blockchain system behind Bitcoin is an open ledger which enables all transactions to be recorded and monitored. Therefore, no alterations can be done once the transaction has been written on the ledger.
This ledger is available for public viewing which makes it very unlikely for manipulation to occur especially by larger organizations.
Nearly non-existent inflation
Regular currencies experience inflation because of shifts in the economy and governments continue to increase the supply of money in the market. With cryptocurrencies, there is a set amount of each currency.
There are only 21 million Bitcoins in the market today. The last Bitcoins are expected to be mined in 2050, and there will be over 10 billion people in the cryptocurrency market then.
With cryptocurrencies, carrying large amounts of money is made simple and safer. You can easily carry it around with the risk of being detected by anyone unlike the use of physical cash. In fact, you can carry millions of dollars worth of Bitcoins in your memory drive.
The transaction fees of trading cryptocurrencies are also much cheaper compared to banks which makes it a popular investment option for traders.
Cons of cryptocurrency
The high profitability that the cryptocurrency market offers comes high volatility. It has been known to be volatile since the inception of the market. The price of Bitcoin can change drastically up to hundreds of dollars.
Many people also believe that cryptocurrencies are good long-term investments. However, there is no guarantee that any of these cryptocurrencies are going to stick around especially for the altcoins with smaller market capitalizations.
Transactions made using cryptocurrency cannot be traced back. The anonymity feature makes it highly vulnerable to criminal transactions. Think of it this way. Drug dealers primarily use cash to avoid being traced back.
The same way, Bitcoin enables transactions to be virtually untraceable. For this reason, countries such as Vietnam, Bolivia, Ecuador, Kyrgyzstan and Bangladesh has banned the use of any decentralized cryptocurrency.
Not recoverable in case of loss
In instances where you find yourself losing Bitcoins due to hacking, you cannot retrieve it back. This is different from banks that help you to resolve any issues related with hacking or stolen credit cards. Some people believe the best way to store Bitcoins is offline.
The encryption key used with cryptocurrencies identifies the currencies instead of the owner. Currently, there are no mechanisms to retrieve lost Bitcoins.
The waiting game
If you go into the market with weak resilience, there is a high chance that you can easily back out once you see you’ve made some loss on your cryptocurrencies. Keep in mind that the market is highly dynamic and the fluctuations can be temporary or permanent.
If you are investing in Bitcoins, you must be mentally prepared to see losses on your trading account especially if the market is in a slump. As an investor, you need to have essential psychological skills.
In this guide, you will learn more about how to trade cryptocurrencies efficiently and make real money with it. A good investor is an investor who is willing to wait it out as the market is highly dynamic
What’s next for cryptocurrency?
Putting all the risks aside, cryptocurrency is one of the most exciting assets that you can invest in. The 21st century has brought about the inception of a decentralized digital currency that utilizes the blockchain technology to run the system.
While there are many reasons for you to celebrate cryptocurrencies, there are equally as many reasons to be wary of the risks associated with cryptocurrency.
That said, don’t just dump your entire savings into cryptocurrency. You need to enter the market with extreme caution especially with the price of Bitcoin reaching new highs.
Not all cryptocurrencies are created equal. This is why before you get started with investing in cryptocurrency, you need to read this cryptocurrency guide that will help you to understand more about if cryptocurrency makes a worthy investment for you.