Every investor who is worth their salt has heard of cryptocurrency since it is one of the fastest-growing and most innovative investments in the market today. Crypto has the potential to push the financial world forward and create a diversified finance system that doesn’t wholly rely on fiat. For this reason, a lot of investors put their money on crypto, seeing its potential to play a massive part in the future of the finance system.
If you are looking to take part in the crypto revolution, here are some of the pros and cons of investing in cryptocurrency that you need to consider before including crypto in your investment portfolio. Allow us to break down the advantages and disadvantages of crypto to help you weigh down your investment options!
Pros of crypto
Crypto is considered to be one of the most popular types of investment in the financial market today and for a good reason. The first reason is that it is innovative. Anything that moves the world forward to the future is worth your investment. Check out the list below for more reasons why you should invest in crypto:
Crypto prides itself on complete anonymity, which would benefit you if you want to have privacy in your investments. Every crypto transaction is processed in a decentralised blockchain, which means that it is free from any central agencies like the government and banks. What makes this amazing is that you don’t have to give any of your personal details to complete a transaction. You only need to provide your wallet address.
High return potential
Crypto tends to spike in value. Its price is derived from the supply of coins mined and the public’s demand for the tokens. The supply and demand dynamic of cryptocurrency and its high volatility promise high returns for investors.
If you are lucky enough to invest in a particular crypto token while it is still low in value, you might just experience quite the payday when it happens to hit the top of the market. You only need to move fast since crypto’s value drops as fast as their spikes.
Cryptocurrency’s underlying technology is blockchain, which is proven to be one of the most secure technologies. Blockchain is essentially a decentralised data-storage ledger that stores information in interconnected blocks with a unique hash, making it impossible for any hacker to tamper with your data.
By and large, the traditional financial system that we currently have relies on the involvement of intermediaries to process every transaction. What this means is that you have no other choice than to place your trust in the bank, government and financial authorities. With the recession in both the US and European countries in 2001, you would start to wonder if it was a good idea.
Cryptocurrency offers an alternative to this. Instead of relying on a third party, you can complete your transactions without any central authority. This means that the transaction only revolved around the sender and the receiver. Additionally, you would have fewer fees to think about as well as a reduced time in processing each transaction both locally and internationally.
Crypto trades around the clock
One of the advantages that you would enjoy as a beginner investor in crypto is the fact that its market is always open. You won’t have to wait for crypto exchanges before you can start trading since crypto tokens are mined and their transactions are recorded around the clock. Crypto is perfect if you are always on the go!
Compared to fiat currency, which has a value chained to the interest of the government, crypto has a decentralised nature that keeps it from being affected by any central authority. Since crypto exists outside of what the banks and the government can handle, it can avoid inflation caused by regression or economic changes.
The only thing that could affect the value of crypto is the trading behaviour of its users as well as the demand and supply of each token.
Cons of crypto
Just like any investment, crypto also has its cons that you need to keep in mind if you want to effectively profit from your crypto investment. Take a look at the possible disadvantages of crypto below:
It takes time to understand
Multi-million investors in crypto don’t get their salt in a day. It takes time to understand the nature of cryptocurrency as well as its market. Since crypto is a relatively unfamiliar technology, there is still so much about it that you need to explore before you can properly invest. Trying to put your money on things you don’t understand is a risk in its own right.
Crypto is extremely volatile
This one is a double-edged sword. On one end, you can profit and earn huge returns on your investment if the crypto you have invested in presents a high value in the market. On the other end, the price of crypto can drop low just as fast as it can rise. This unpredictability and speed of crypto’s change in value can present difficulty in trading for investors.
Crypto operates using blockchains. For blockchains to work smoothly and effectively, they need to limit their users. This means that if the users of a token reached a certain capacity, the rate at which the transactions are processed would also slow down.
Despite the growing recognition for crypto, it is still difficult to find a real-life application for it. You can use crypto on certain platforms and stores online, but most shops are yet to recognise crypto as a legal tender and thus, using it for your purchases can be difficult.
While there are some countries like El Salvador that recognise crypto as a legal tender, there are still some countries like China that refuses to accept the use of crypto in their financial market. The reason for this is that crypto is decentralised and thus, the government has no authority over it. Countless crackdowns have already been implemented in China as well as other Asian countries like Thailand and Vietnam.
Should you invest in crypto?
Now that you’ve seen the advantage and disadvantages of crypto, it’s time to answer the question of whether crypto would be a worthy investment for you. Based on the data shown above, the pros of crypto far outweigh the cons when it comes to security, profit and availability for trade. All of these are important factors that you need to consider for your investment. As for the cons, you can avoid some of them by keeping yourself well informed about your investment. Overall, crypto is a good start for your investment portfolio!