Is it worth putting your money into cryptocurrency? There’s no denying the appeal of crypto currency. Crypto currency has been increasing over the past several years. Yet, if you’re new to investing, or you’re not sure about how to invest in crypto currency, there are several factors you should consider before getting involved. You can also read our other articles on what is crypto and how to mine crypto. In this post, we take a look at three common risks related to cryptocurrency investing. We will also look on how to protect yourself against them.
Disruptive Technology
Blockchain has become the latest disruptive technology which has caught many investor’s attention. Many stakeholders think that blockchain technology has power to redesign the economic landscape. Even in the world of dollars and cents, money is often digital. You use a debit or credit card at the store, no money is needed. No one takes a bucket of cash in to apply for a loan or mortgage. All it is digital.
The decentralized character of Bitcoin is part of its attraction as public trust. Some financial managers and investors are starting to tell clients to include Bitcoin in their portfolios; the recommended percentage of assets is often between 1 and 5%. But crypto currency is risky! So, continue with caution.
How Safe is Cryptocurrency?
Cryptocurrencies fall under the high risk but high reward category of investing. The sector is still very speculative now, so investing in it is regarded as being considerably riskier than doing so in standard stocks.
Whether cryptocurrencies will ultimately succeed in displacing fiat money is up for debate. It is unknown if it will ever have applications in society.. Because of this, the value of digital currency is always changing.
Stocks, as opposed to cryptocurrencies, have a long history of increasing in value over time. Yes, stock values will fluctuate, but over the long run, they move upward.
If you’re risk averse or only have a little sum of money to invest, you probably shouldn’t buy cryptocurrencies. You have a far larger danger of losing all of your invested money because of the industry’s high level of volatility.
CHowever, if you’re willing to accept the level of risk involved, cryptocurrency may be a good investment.. You have to be mentally prepared to afford to lose your money.
Even so, there are a few things to consider before making a purchase.
Cryptocurrency a Long-Term Investment
Many cryptocurrencies, including Bitcoin and Ethereum, are launched with ambitious objectives. These high goals might be accomplished over very lengthy time horizons. This increases the risk associated with trading. While no cryptocurrency project can assure success, individuals who make an early investment in one that achieves its objectives stand to win significantly over time.
Any cryptocurrency venture must, however, be widely adopted in order to be considered a long-term success.
What are average returns for cryptocurrencies?
There is no guarantee that a cryptographic currency would endure over time in the real world.
For instance, just seven of the top 10 digital currencies by market value in 2013 are still operational today..
In 2013, one bitcoin was worth just shy of $112, and had an all-out market worth of simply more than $1.2bn. On May 16, 2022, one bitcoin is worth about $30,000 and has a complete market worth of $1.3trn.
A long time ago, the price of one litecoin was $3.38. It had a value of around $245 per coin in April 2021. Presently it is valued at $67.
While two of the ten, freicoin and terracoin, have significantly declined in value over the intervening period, Devcoin, Novacoin, and CHNcoin are not typically listed by Coinmarketcap; A mention of terracoin division was in 2013.
Therefore, buying more affordable coins and holding onto them as a long-term investment won’t actually result in anyone making any real money.
New digital payment methods are continuously being introduced to the market. Dogecoin is only one ongoing model that took off in May 2021 however has attempted to support financial backer energy.
Bitcoin in Long Term: Still Incredibly Volatile
The price of Bitcoin — and all cryptocurrencies, for that matter — is extremely erratic because they are such a young currency and sector. Within a day or even a few minutes, the price of Bitcoin can see wild fluctuations. This increases the risk associated with trading.. Fundamentals typically favor currencies in general. The “fundamentals” of Bitcoin are still evolving, hence it is not yet a fully working currency.
It is instructive to consider the prior all-time high as a long-term investment. This took place when Bitcoin surpassed the $20,000 threshold in December 2017. When you consider that Bitcoin is currently regularly trading at $50,000 or more, that would sound alluring, but a short while later, in February 2018, the price had plummeted to less than $7,000. There’s a good chance that this sudden decline could occur again.