Cryptocurrency was all the rage in 2017. You couldn’t scroll through your social media feed without seeing a friend or family member talk about how they made thousands of dollars on their investment. The only problem? Cryptocurrency in 2023 is still somewhat of an unknown to many people, and there are plenty of myths surrounding it.
Let’s explore the pros and cons of investing in cryptocurrency.
Pros
There are many reasons why you should consider investing in cryptocurrency.
- It’s a new asset class that can be used for payments and transfers.
- Cryptocurrency is decentralized, meaning it’s not regulated by any central authority and the technology is still in its infancy. This means there could be huge potential for growth over time as more people adopt it as a payment method for goods and services, or even just invest their money into it as an investment vehicle.
- Cryptocurrencies are also transparent: anyone who holds tokens can see how much they own at any given point because all transactions are publically recorded on blockchains–this feature makes cryptocurrencies extremely secure from fraudsters trying to steal identities like what happened during Equifax’s recent data breach (where consumers’ personal information was stolen).
Cons
It’s important to keep in mind that investing in cryptocurrency is a highly volatile investment. There are no guarantees of success, and you could lose money.
- You can’t sell your cryptocurrency back to the bank or get cash out of it. If you want to use your money, you have two options: either buy goods and services with it (and hope those merchants accept cryptocurrency), or exchange your coins for traditional currencies on an exchange like Coinbase or Kraken.
- There’s no central authority where you can complain if something goes wrong with one of these exchanges (or any other aspect of investing in crypto).
Limits to Investing with Cryptocurrency
You need to have a fair amount of money to invest. You can’t just throw in $100 and expect it to make you rich overnight, but if you have enough cash on hand and are willing to accept the risk, then cryptocurrency might be an option for you.
You’ll need to do your research first so that you understand how each coin works and what makes it unique from other coins in its field. You’ll also want to look into the history of each coin so that when someone offers advice about investing in one particular currency over another, they’re not just trying to sell their own product or service instead of giving genuine advice based on facts rather than opinion or speculation.
Value Can Go Up or Down Significantly
When you invest in cryptocurrency, the price can go up or down significantly. This is called volatility and it’s something that investors must be aware of when they choose to invest in this type of asset class.
The example below shows how volatile bitcoin has been over time:
- On 10 November 2021, one bitcoin was worth around $66,953.34.
- By 6 February 2023, its value has decreased to $22,840.81 per coin
There is No Central Authority
If you invest in cryptocurrency, there is no central authority. This means that if your coins are lost or stolen, there is no one to complain to. Further, there are no safeguards to protect you from scammers and hackers who may try to steal your money by tricking you into giving them access to your private keys (the key used to unlock your funds).
Volatility is Extreme
Volatility is a major risk when it comes to cryptocurrency. This can be especially true for newer cryptocurrencies that are still finding their footing in the market. The value of these coins can rise and fall dramatically over short periods of time, making them difficult to predict and risky investments.
The best way to protect yourself from volatility is by diversifying your portfolio with multiple currencies so that if one currency goes down in value, your other holdings may go up instead.
There is a Lot of Fraud to Navigate
One of the biggest disadvantages of investing in cryptocurrency is that there is a lot of fraud to navigate. Cryptocurrency is a new technology and market, so there are many scams. You need to be careful about who you trust and what they’re selling you.
If you’re thinking about investing in cryptocurrency, be sure to weigh the pros and cons first
You should only invest what you can afford to lose–like any other investment, there’s no guarantee that cryptocurrency will increase in value over time.
If you do decide that cryptocurrency investing is right for your needs and goals, then go ahead and do your own research! Look up information on different currencies and exchanges online before deciding which ones are right for you based on their market caps and price fluctuations over time as well as any regulations currently being enforced by government agencies like the Securities Exchange Commission.