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Cryptocurrency: Is it a Good Investment?


 

Cryptocurrencies are digital currencies that use cryptography (the process of converting legible information into an almost uncrackable code) to regulate the generation of units of currency and verify the transfer of funds.


They typically don't rely on central authorities or banks, which means transactions are peer-to-peer and nobody has control over your money. 


But is it really worth investing in cryptocurrencies? Here are some reasons why you might want to think about adding cryptocurrency to your portfolio.



What is cryptocurrency?


Cryptocurrency is a new technology, the only way to buy and sell is via an exchange where users can send and receive different cryptocurrencies by using an account number and password. 


This means if you're using this account to buy something, then the person selling can see your purchase. They could then cash out using a different cryptocurrency. 


It's one of the easiest ways to transfer large amounts of money into the hands of any individual around the world. 


There are more than 1,700 cryptocurrencies out there today, and Bitcoin is by far the most famous with its highest value reaching nearly $20,000 in 2017. 


The only other currency to exceed that in value is ethereum, with ethereum's cryptocurrency, ether, valued at more than $300.



Why invest in cryptocurrency?


•They offer opportunities for arbitrage and speculation. A big barrier to entry for buying crypto-assets is the steep expense of initial coin offerings, where new coins are sold in order to fund the projects that led to their creation.


 The additional selling pressure has slowed the increase in cryptocurrency prices, which has provided a favorable opportunity to buy crypto-assets at cheaper prices, even though the total supply of tokens is growing.




•You can obtain virtual coins from multiple wallets, and they can be transferred to and from regular (hardware) wallets in a way that does not rely on intermediaries. This makes them more accessible to a broader segment of users.




•It is becoming easier to mine digital currency.



Does cryptocurrency have any risks?


The fact that Bitcoin, Ethereum, and other cryptocurrencies are still very young and there are still very few millionaires (if any) in this new industry, means there are still some risks associated with cryptocurrency.


 Some critics say cryptocurrency is ripe for a bubble-like collapse, and some even speculate that it will be supplanted by better technology in the future since it is essentially based on "bits" of code that have value. 


Others are concerned that the high prices associated with cryptocurrencies will end up attracting bad actors to the market, like hackers and people who will prey on users.




Cryptocurrency is still a new technology, and there is no way of knowing how long it will be around. It's possible that Bitcoin or another cryptocurrency could even become obsolete.



Is cryptocurrency a safe investment?


This has become a major concern for investors lately, particularly because it's not a well-understood area of the investment world. 


For most people, investments in cryptocurrencies are risky and the value of coins and tokens can fluctuate rapidly. In the cryptocurrency market, it's a good rule of thumb to never invest more than you can afford to lose.


 Cryptocurrencies are also ripe for hacking and scams, making it even more dangerous to invest in them.




A surge in interest in cryptocurrencies, primarily from speculators, drove the prices of Bitcoin and Ethereum to nearly $20,000 and $1,400, respectively, last December.




Bitcoin futures [SXCM, YINN] on Cboe Global Markets are one of the main exchanges where people can now purchase cryptocurrency.



Conclusion


As we previously stated, investing in cryptocurrencies can be quite risky. But with proper due diligence and information, you can determine whether investing in cryptocurrency is the right choice for your portfolio.

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