For the past decade, the cryptocurrency has continuously landed our business news pages. It has been the talk of town of traders and finance experts due to its well performance in giving high margins for investors.
With this information, many have sought to answer: should I invest in cryptocurrency? Let us talk about this further by having a real talk about how it is inside this market. Painting the most realistic picture in your head will help you should you intend to invest.
What is Cryptocurrency
With the popularity of Bitcoin 9 years ago, news about cryptocurrencies spread all around the globe like wildfire. What exactly is this? How do they become investments?
Cryptocurrency is a digital currency used to facilitate global, decentralized, peer-to-peer transactions. They are void of any management from banking institutions nor governments. They are, instead, based on a blockchain technology used to send data in cyberspace. The data is secured by cryptography which makes them really difficult to get hacked. With this set-up, cryptocurrency can be used to facilitate online payments.
There are many ways up to how you can gain profits in cryptocurrency. The most popular ones are long-term investing and trading. Just like in flat money, crypto values can appreciate depending on several factors. You can also use it in buy-and-sell trading to maximize its potential growth.
Pondering About Crypto Investments
By now, you have probably heard a lot of great good things saying how you can exponentially grow your money in cryptocurrencies. Let us rationalize these thoughts by explaining several aspects that may affect your investment’s value. Just like in any profiteering ventures, there are risks worth considering. But on the other hand, if you hit the jackpot, you can really grow your money in an unprecedented manner.
Let us take a closer look on the different factors that might help you answer the question: should I invest in cryptocurrency?
Cryptocurrency is for various use.
There are a lot of legal business transactions that have successfully accepted cryptos for availing their products and/or services. They are even great to use for big transactions because they are popularly known to be faster and cheaper with the cost of transaction fees. This is what makes them ideal for international transactions.
Since they decentralized assets, cryptos are free from any authorities. Thus, just in case you get into trouble, they cannot be frozen and can remain at your disposal. You, as the owner, will remain to only have the access to it since you are the only one who possesses the private key. These very characteristics are what made them known to fund certain legal transactions. There are no proven cases yet, but it remains to be an open secret in the industry.
Whether this factor makes you swing to a yes or to a no in answering “should I invest in cryptocurrency”, is up to you.
Cryptocurrency can be a long-term investment.
Yes, you might have read that cryptocurrency tends to appreciate over time. But a more accurate description would be, a certain type will rise in value if it has successfully made itself used in a widescale community.
Upon introduction to the market of a cryptocurrency, its creator will spend its early years to maximize its influence on the movements in the market. Meaning, a number of merchants must adapt it and a large number of consumers must use it in their transaction. After all, you cannot put value in something that is not being used by the people.
Another technique that crypto creators use to ensure its utility is that they introduce it as a currency not just for buy-and-sell. Instead, they package it along with certain kinds of innovation that is helpful to certain group of people. This is how they gain user size drastically. For example, Ethereum currency has introduced a platform that can replace internet servers that developers and IT companies can alternatively used to launch their mobile and desktop applications. Along with this offer, they present contracts wherein only Ethereum can be used. This is how they ensure that this crypto will not be obsolete for the years to come.
Should I invest in cryptocurrency for a long-term? If you decide to do so, research on which cryptos are liquid enough to be continuously used by the general public or are stable enough to act on a specific niche in a community.
Crypto is speculative money.
At the end of the day, cryptocurrencies are speculative money. Its very nature is risky and can be wildly unreliable. Banking experts cannot totally apply their logic to these assets because they are unregulated and void of any authority.
Considering this factor in the equation, would you invest in cryptocurrency still? We are not saying no. You just might be reminded that no matter how good of a trader you are, you still must prepare to lose some money. Not everyday is a holiday. And there are really days when it gets unpredictable no matter how good the odds are. If this happens, do not fret, the best traders experience the biggest falls too.
Is there a Way to Minimize the Risk?
Especially if you are just starting to get the hang of cryptocurrencies, you might wonder if there are ways to invest your money with less risks. Maybe it is time for you to explore what they call as “stablecoins”.
Stablecoins are cryptocurrencies which refers their value in other real-world reference, like the US dollar value for example. With this way, there is a tangible asset where you can base your prediction about the value of your cryptocurrency. An example of a stable coin is DAI. During the pandemic, not only it was able to maintain its value during the first months of lockdown, but it has also doubled its market value later.
Another less risky option is to invest in companies associated with cryptocurrencies. JP Morgan and Wells Fargo have JMP coin and Wells Fargo cryptocurrencies, respectively. Meanwhile, Facebook has announced that they will launch Diem by January 2021. Learn more about investing in cryptocurrency here!
Should I invest in cryptocurrency? Yes, but only if you have dedication to know the ins and outs of the game first. Prepare yourself on the possibilities. After all, the crypto playing field is not a free-pass venture. It takes skills, time, commitment, and some risks for you to have a positive outcome.
Cryptocurrencies remain to be a market of great potential. Explore it further on a phase you are most comfortable with. You will never know, maybe one day, you are the next big trader in the newspaper.