Basics of Crypto Investing: Should You Invest in Cryptocurrency (Or Not)?
If you seek online investment opportunities, you might have come across Cryptocurrencies in the form of Bitcoin and Ethereum. This certainly tickles the investor genes inside a person. However, like all kinds of investment, there are things to consider whether you need to invest in crypto or not.
Bitcoin works similarly to other high-risk investments. It implies that your decision to invest is dependent on your goals in investment and risk tolerance. As an investor, you should consider Bitcoin’s drawbacks and benefits. You have the right to know everything about Bitcoins before plunging into investment.
This article will discuss the advantages and disadvantages of investing in Bitcoins.
The central government or regulating entities control the value of a currency. Contrary to this, cryptocurrency is not regulated. Generally, the value of crypto coins is determined by the holders of the coin. Decentralisation of the cryptocurrency makes sure that no central government or regulators can control its value.
Advantage: Secure and confidential
Consumer data is crucial, and there is an excellent possibility that hackers can steal these. However, transactions done with cryptocurrencies are unique between two parties. This protects both users from identity theft concerns. Furthermore, blockchain technology ensures that the transaction is secure and confidential. This technology is based on complex algorithms that make it difficult for hackers to steal consumer data. In addition, users are further protected because of pseudonyms that are not linked to any users or accounts.
Advantage: 24/7 Access
Cryptocurrencies operate 24 hours a day, seven days a week, unlike the stock market. Therefore, users can engage with the crypto market 24/7. This feature makes it very attractive for traders as their time for trading is not limited. For more information about crypto trading, click here.
Advantage: Possible protection against inflation
Financial experts debate whether crypto is protected from inflation. Because cryptocurrency is unregulated, crypto is confined against inflation. Usually, banks print cash. However, crypto can only be released at a certain amount. This limitation fights inflation and increases the value of Bitcoins as more users adopt its use.
Advantage: Only two parties involved
There is no need for a middleman when it comes to making transactions in cryptocurrencies. Third parties such as credit card companies or banks are not involved, making fund transfers easier and cheaper to facilitate. The process of fund transfer involves the use of public and private keys. Thus, there are lower fees when transactions are completed.
Disadvantage: Possible use for illegal activities
One of the salient features of crypto is that it is decentralised. Thus, it makes it difficult for regulators to monitor individual users through the wallet IDs. Unfortunately, this also makes it attractive for some unscrupulous users to conduct illegal transactions such as money laundering, terrorism funding, and the purchase of illicit terms.
Disadvantage: Highly volatile market
With great potential gain comes great possible loss. This scenario is actually for crypto as its market value price fluctuates daily. Events such as the US proposal for capital gains tax can lead to a fluctuation of the price in a day.
Disadvantage: Takes time to learn
Newbie traders find it challenging to understand cryptocurrency as it is based on complex blockchain technology. There is a high level of risk when a person does not perform intensive research. A study shows that only 1 out of 3 investors are adept with crypto. People find it easier to grasp cash, especially in third-world countries.
Disadvantage: Difficult to understand
For beginners, crypto is challenging to understand as it is based on complex blockchain technology. Without proper understanding and doing intensive research, dealing with it proves many risks that can lead to losses. A survey shows that more than 1 out of 3 investors know little about crypto. Cash is much simpler to grasp, especially in third-world countries.
Scam coins can quickly be developed since crypto is decentralised. With no regulators that control it, developers can create a new coin and begin Ponzi schemes.
Investing in Bitcoins involves a risk because of the volatility of the market. Therefore, you should do diligent research when you plunge into investing in it. If you need more information about Bitcoin trading, click here.