What are the main pros and cons of Cryptocurrency investment?
Discover the pros and cons of investing in cryptocurrency to find out whether this asset is a worthwhile investment for you!
Cryptocurrencies have managed to shake up the financial world over the past decade. Although their future cannot be known for sure, many experts predict that they will eventually replace traditional forms of currency. Even if this is crypto’s destiny, this virtual currency still has a long road ahead.
The question that often comes up with people considering investing in crypto is - What are the advantages and disadvantages of cryptocurrency? Like everything else, crypto isn’t perfect, and there are definitely risks associated with trading this asset.
However, there are also many benefits to trading crypto and using it to make purchases. Keep reading to discover the top advantages and disadvantages of investing in cryptocurrency to find out wherever this asset is a worthwhile investment for you!
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Pros and Cons of Investing in Crypto
Not sure whether you want to take the leap and start investing in cryptocurrency? Or do you simply want to find out more about the ins and outs of this virtual currency? If that's the case, take a look at crypto's five pros and cons so you can decide if investing is a good option for you!
Pros of Cryptocurrency
Below are some of the pros and advantages of cryptocurrency investment.
1.Investing Gives You a Chance of High Rewards
One top advantage of crypto investing is the chance of high rewards. Plenty of coins have already experienced massive price surges, which led to profits for many traders. Even beginner traders who only invest small amounts of crypto in altcoins have a chance of making a huge profit over time.
It's important to remember that any coin can experience rapid growth. Bitcoin, the most popular crypto to ever exist, was only worth about $0.10 in October 2010.
If you invested $100 in this coin during that month, you'd have approximately 1000 Bitcoins, which in 2021 would have been worth more than $48 million! There's no limit to how much profit you can make from investing in crypto.
Of course, no one is guaranteed to make a profit from trading cryptocurrency. But if you do plenty of research, never invest more than what you're willing to lose, and learn to manage FOMO, you have a much better chance of making a long-term profit from your crypto investments.
2.Fast and Cost-Effective Transactions
Compared to traditional transactions, crypto is a cost-effective way to send and receive money. There are little to no extra costs that are required to be paid by users since there aren't third parties involved (such as PayPal and VISA) that would usually charge a transaction fee.
Sending crypto is also super fast, and users are not affected by foreign fees and exchange rates, making it an effective method for international transactions. Using crypto is your best option if you want to make an instant transaction with someone on the other side of the world without needing an intermediary.
3.High Level of Security and Privacy
Since blockchain is highly secure and made up of 'puzzles' that are incredibly hard to decode, crypto transactions are far safer than other electronic transactions.
When you make a transaction through the blockchain, that transaction is shared with every other computer on the network. All coins are easily traceable, and the overall system is highly reliable.
These blocks also cannot be altered unless most of the network agrees. Hence, hackers are unable to steal cryptocurrency because their blockchain would no longer match everyone else's. Additionally, despite crypto being traceable, all traders can still trade it anonymously, as having a crypto wallet is similar to having a pseudonym.
The decentralization of cryptocurrency is an advantage that cannot be overstated. Almost all coins that are created are controlled by their developers. This means that no single organization, such as a bank or government, can control the currency and determine its flow.
This distinguishes crypto from fiat currencies as this decentralization can keep the currency stable and transparent. All cryptocurrency transactions are peer-to-peer, and users don't have to blindly trust any banks or other financial organizations throughout the process.
This is especially important since, at any point, your bank can deny your transaction for various reasons. Whereas with crypto, you are free to use your coins however you see fit.
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Another advantage that cryptocurrency has over banks is that it is not restricted to opening hours. Banks are typically active between 9 am and 5 pm and don’t operate during weekends and bank holidays. This means that time-sensitive transactions may be delayed, causing frustration to the user.
On the other hand, cryptocurrency can be traded 24/7 from anywhere (as long as you have an internet connection), so if you’re always on the go and stray away from normal working hours, then making transactions through crypto may be your best choice!
What to Do if You’re Interested in Investing in Cryptocurrency
If you believe investing in cryptocurrency is a good option, congratulations! Now it’s time to make the first step!
If this is your first time trading cryptocurrency, you should consider seeking the support of a professional broker through a crypto platform. Connecting with a broker can provide resources and tools that can help you elevate your crypto trading game and set you apart from other beginner traders.
There’s a wide range of crypto platforms to choose from, but if you are looking for a simple yet effective platform, we suggest starting with Bitcoin Up. Registration is free, and once it’s completed, you get instant Access to a broker and various tools to set you out on your trading journey.
Cons of Cryptocurrency
Crypto is not all perfect, and just like every aspect of life, the crypto market also has a blemish. Thus, here are some of the noted disadvantages of cryptocurrency.
One major disadvantage of crypto is its high volatility. This means that the currency can experience rapid price fluctuations, leaving traders with losses. A particular coin may appear stable, which tempts traders into investing a lot of their money into it.
But, this seemingly stable coin can plummet at any moment, as this is simply how the crypto market works. Although the price of crypto is primarily determined by its supply and demand, many external factors can still influence it, including political events, government regulations, and social media narratives.
2.Not Yet Widely Accepted
Another unfortunate disadvantage of cryptocurrency is that it is currently not widely accepted as a form of payment. Although a handful of large companies, such as Telsa, already accept crypto in exchange for products, with more companies beginning to follow suit, most of the time, you will not be able to purchase a product with your cryptocurrency directly.
Hopefully, this will gradually improve as more companies find success when accepting crypto as a form of payment, but this will likely be a slow process.
So, in the meantime, if you want to make purchases using your crypto, you’ll either have to do your research to find out which companies accept it or go through a crypto payment processor.
Although we have highlighted the pros of crypto decentralization, you should still be aware of the cons. For instance, this decentralization means that the crypto market is widely unregulated.
You can fall victim to a scam when using crypto, and government laws or regulatory bodies won’t protect you.
Some counties, including Russia, China, and Qatar, have ever placed bans or restrictions on crypto, so if you live in a country that chooses to do the same, you might lose Access to your assets.
Additionally, unlike traditional currencies, you cannot cancel or refund your crypto transaction. So if you send funds to the wrong wallet address or get tricked into sending money to a scammer, you cannot get your crypto back unless the recipient chooses to return it. Even worse, if you lose your private access key, you’re unlikely ever to get your crypto back.
4.Risk of Cyber Attacks
As secure as blockchain technology is, it is still susceptible to cyber attacks. After all, the cryptocurrency environment is highly profitable, making crypto traders prime targets for hackers. Scammers will try and trick traders into handing over their wallet keys.
This can be done through phishing attacks which rely on victims voluntarily providing sensitive information or sending crypto to a scammer’s account. If you receive an email that pressures you to click on a link or input your account details, you should immediately delete it.
Additionally, if you receive a message stating that you’ve won a crypto giveaway and all you need to do is send across a small amount of crypto, then block the sender.
These tactics may seem obvious, but many traders fall for phishing attacks and other scams yearly, resulting in millions of crypto stolen!
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New traders believe they can just jump into the crypto market and start investing. Although this is possible, it's definitely not recommended.
Generally speaking, to be a successful trader, you need to have a reasonable understanding of the crypto market and a working knowledge of trading. We also highly suggest taking time to research any coins before you choose to invest in them.
This means checking out the coin's price history on a crypto marketplace, reading the whitepaper, and looking through the developers' social media coins.
Many traders skip this step which sometimes results in them unknowingly investing in a pump-and-dump scheme. This form of scam is where fraudsters will pump up a coin by hyping it through social media to convince traders to invest.
Once the coin's price has been inflated, scammers will sell their assets and move on to the next scheme, leaving their victims with losses.
Overall, as profitable as cryptocurrency can be, it certainly isn't for everyone. Despite facilitating faster and lower-cost transactions, crypto is currently only used by a handful of companies. Additionally, since the market is so volatile, inexperienced traders may suffer massive losses after making poor trading decisions.
However, investing in cryptocurrency can be extremely profitable, especially for traders who have done plenty of research and have a reasonable understanding of the market. Making transactions with cryptocurrency is also much more convenient than traditional currency forms since users can send crypto 24/7 without the need for an intermediary.
So, to conclude, crypto has plenty of advantages and disadvantages. Whether it is worth investing depends on each trader's experience level and personal goals.