Cryptocurrency is currently the hottest buzzword in the world of investment. But what exactly is cryptocurrency? Have you ever heard of Ethereum, Bitcoin, Dogecoin, Litecoin, or XRP? They’re in fact different kinds of cryptocurrencies (aka digital money).
But, the million-dollar question is this, though: Should you make a cryptocurrency investment? The purchase of cryptocurrencies is not a secure bet for your future investments, despite what every tech geek or new experts on the internet tells you. But, it is fruitful for those who have vast experience in investments or have many income streams.
But more on that will be covered later. Let’s first define what exactly cryptocurrency is.
What is cryptocurrency?
Cryptocurrency is a digital asset that is either used for an investment or for online transactions. These are earned or bought through the exchange of real currency like dollars to convert it into coins or tokens.
What are the risks of investing in cryptocurrency?
The risks associated with investing in cryptocurrencies have been highlighted by governments and financial regulators in practically every nation. They are discouraged by the authorities and are labeled as illegal ways of transaction or earning in some countries like Pakistan or India.
However, investors may rush in without considering the potential consequences when an investment generates headlines for sky-high returns, is highlighted in commercials, or is recommended by celebrities as a means to become wealthy. This poses a risk to encourage the currency which is not legalized or used within a country law.
Should You Invest in Cryptocurrency? 4 Things to know Beforehand
Before you say goodbye to your dollars and hello to Bitcoin, Ether or Doge, there are a few things you need to know up front.
1. Cryptocurrency is unstable.
Crypto is, in fact, about as irritable as a two-year-old. You never really know what you’re going to get each day because of the way in which its value swings up before falling back down.
Cryptocurrency values go through extreme highs and lows. It’s undeniable that some people are really popular right now, but for how long? The cost is reduced within a second. To put it mildly, investing in cryptocurrencies is dangerous.
Thus, there is a lot of risk involved with cryptocurrency; it is not a sure thing. So, if there is risk involved in any investment then plunging into something that is so unreliable is a mistake.
2. Cryptocurrency has lots of unknowns.
The functioning of cryptocurrencies still requires a lot of development. Only a small portion of the world’s population truly comprehends and is familiar with the workings of the system. You shouldn’t make investments you can’t explain to a 10-year-old. There’s a whole complex system behind the creation and working of crypto that mostly goes over the head for even adults. Thus, if there’s ambiguity in understanding the investment area, then why risk it in placing your hard earned money. According to reports, the majority of people say they are still cautious to invest any money in cryptocurrencies (72%) or don’t trust them at all (68%).
3. Cryptocurrency makes fraud easier
It only takes five minutes online to realize that not everyone is looking out for your interests. Scammers will do anything to gain access to your passwords and personal information, including your bank account.
Targeting people like you is made much simpler for them by cryptocurrency. In fact, since October 2020, about 7,000 consumers have reported losses totaling more than $80 million due to cryptocurrency frauds, according to the Federal Trade Commission (FTC).
Now, understand that we are not arguing that everyone who works with cryptocurrencies is a bad guy who avoids the law and engages in dirty business on the black market. But crypto gives an easy chance to anyone who is looking to commit a crime while remaining undetected and untraced.
4. Cryptocurrencies have an unproven rate of return
Cryptocurrency trading resembles gambling in some ways. There is no pattern to the rise and fall of its value because it is traded person to person without any real regulations. In contrast to growth stock mutual funds, you cannot forecast changes or compute returns. Simply put, there isn’t enough information or authority to base a long-term investment strategy on cryptocurrencies. Your financial future is not a game you should play here.
Bottom Line: Wealth creation is a gradual process, and there are still far too many unanswered questions regarding cryptocurrencies. Could cryptocurrency eventually develop into a more reputable form of investment? Sure. But as things stand right now, there is still a long way to go. Cryptocurrencies are made for billionaires or for those who are risky enough or have many income resources with profitable assets. But if you’re new to it, have few income resources then it’s not a safe or good investment opportunity for you.
Have you invested in crypto? Do you agree with our opinion? Share with us your experience.