Last Updated on Jan 25, 2022 by James W
Investing in cryptocurrencies has become a trendy investment option for most people today. Just like investing in the stock market, a little wrong decision is so dangerous and can cost you your hard-earned money. Whether in the long term (hold strategy) or the short term (trade strategy), investing in cryptocurrency this year is a beautiful decision to make, especially with the arrival of promising cryptocurrencies. But before you go ahead in deciding the best cryptocurrencies to invest in today, here are a few facts you need to know about cryptocurrency investment.
What are the Risks of Investing in cryptocurrencies?
Bitcoin, Ethereum, and other Ripple can seduce given their performance. These virtual currencies are even considered by some as safe havens in times of crisis. Investing in cryptocurrencies is not without risk, however.
Cryptocurrencies are 100% digital-based, which are exchanged peer-to-peer via a decentralized and secure computer system. Among virtual currencies, Bitcoin is unavoidable. We can also mention its big competitor, Ethereum, as well as lesser-known currencies such as Ripple, Tether, and Litecoin. Following an upsurge of Cryptocurrency brokers and online purchasing platforms, we all must take the risks associated with investing in cryptocurrencies seriously.
Before putting your money into cryptocurrency, below are a few facts to bear in mind:
Cryptocurrency Volatility
Volatility is the primary risk of cryptocurrencies. Most cryptocurrencies are not backed by physical currencies or linked to a tangible asset like gold.
Cry to currencies are relatively independent of the political and economic regulations, which implies that the law of demand and supply determines their prices. It is this fluctuation that makes investing in cryptocurrency very risky. Indeed, if the price of cryptocurrencies can reach all highs, it can also plummet in seconds.
Again, transactions in cryptocurrencies are only done online. There are no coins and notes. These assets as stated earlier, are very volatile, that is to say, their value can vary very rapidly upwards or downwards. Some have seen their prices drop drastically following communications from influential personalities on social networks. Their value is based solely on investor confidence.
These are therefore very risky investments, which are only intended for well-informed investors.
The lack of regulation of virtual currencies
Cryptocurrencies are not regulated by today’s banking legislation. And even if regulation eventually emerges, they still evade the constraint of states and financial establishments. Cryptocurrencies as they are, have no regulated price or face value. Because of this lack of regulation, investors are not protected by any legal guarantee of reimbursement in the event of losses of their cryptocurrencies due to unforeseen technical failure, human error, or premeditated theft.
Regarding the above point, the risks of hacking and theft of cryptocurrency are real. This may be linked to the fact that no institution oversees the protocols for securing cryptocurrency-related data. Even after the boasts by several quarters of how secure their platform is, the problem of hacking and scams persist.
Investing in cryptocurrencies and scams
The further problem related to cryptocurrency investment arises from their growing popularity. With the sprout up of digital currencies, more scammers arise and are on the prowl. Even the most trusted cryptocurrency websites have fraudulent dealers on their platforms. There are cases of individuals acquiring people’s cryptocurrencies, dupe investors, and then vanishing into thin air.
Is Investing in Cryptocurrencies Worth it?
Despite the tons of risks listed above, there are still more positive sides to cryptocurrency investment. When you want to invest your money, it is important to diversify your investments and go for the big gains.
With the all-time highs seen, and more businesses accepting cryptocurrencies as legal tender, it seems very apparent that the future of money and global finance will be in cryptocurrencies. Below are some reasons why you should consider a cryptocurrency investment:
Cryptocurrency is the future New Money
If we are still only at dawn, the revolution has already started. Just look at the trading volumes and global transaction volumes of cryptocurrencies that have been growing steadily since 2015. Dozens of new cryptocurrencies are created each year, some more or less wacky or wacky (see the cons chapter below)
Choose to invest in cryptocurrencies such as bitcoin, Ethereum, Litecoin, or Ripple (there are still many other cryptocurrencies worth considering). Because of their respective capitalizations, most cryptocurrencies have the potential to evolve as players in the future economy starting today. Furthermore, if you are one of those who believe that the global financial system as we know it will collapse within fifteen or twenty years, then all the more reason to “tilt” into the 21st century by opening a free account to start trying out these new digital currencies.
Cryptocurrencies are the new asset class
The next positive side of investing in cryptocurrencies is the one that consists of continuing your diversification by investing in a new class of assets, differentiating from those you currently have since they are virtual currencies (some are even in the sector video game).
If yiu have tried your hand on different investment opportunities and yiu are looking for ways to expand, undoubtedly, cryptocurrencies are a new asset class with great potential. They are decentralized digital currencies, that is to say not subject to the control and centralization of central banks, it is in particular in this that it is a new class of assets.
The list is long, but cryptocurrencies such as Bitcoin, Ripple, Litecoin, Libra, or Ethereum are among the most popular cryptocurrencies and can even be compared to international currencies; without limits. With the new features of these digital currencies, you no longer need to convert into a local currency, cryptocurrency is accepted globally by most businesses.
Exponential Performance
The performance potential of some cryptocurrencies is out rightly unbelievable. This is obviously what interests and attracts investors first: these crazy figures!! these incredible returns that cryptocurrencies can generate. If we have witnessed almost vertical take-offs at certain times, we must not lose sight of the fact that these are particularly volatile investments, that is to say, which are likely to undergo very large variations over a very short period.
In summary, what should be remembered from this third advantage relating to performance is that yes, indeed, it can be quite relevant to hold 10 to 15% of your investment portfolio invested in cryptocurrencies via a secure platform. but as with everything else, “don’t put all your eggs in one basket”.
Conclusion
With the above mentioned, there is no gain repeating how okay it is to find and invest in the best cryptocurrencies. However, the basic rules of the game are to invest wisely and be ready for the fall and rise of cryptocurrencies. Research more and read extensively before plunging your money. Articles such as the best cryptocurrency to invest in 2022 and other similar information are good to get you started on the right foot.
