By EWN • 06 August 2021 • 10:18
It is true that you can get filthy rich by investing in cryptocurrencies. However, it is also one of the most riskiest investments you could ever make and you could also lose all of your money. Basically, investing in cryptocurrencies can be very risky but such an investment also has the potential to be extremely profitable.
The risk factor drives many potential investors away from the world of cryptocurrencies. There are many different factors that make investing in crypto assets not entirely safe, at least currently. However, people have referred to cryptocurrencies as the “future of money” and many crypto enthusiasts believe that cryptocurrencies are here to stay. We will now look at some pros and cons of investing in crypto assets.
Risks associated with cryptocurrencies
Cryptocurrency exchange platform users are vulnerable to becoming targets of criminal activity, especially hacks and frauds. It is worth noting that because of such security breaches many investors have had to suffer huge losses because they had their crypto assets stolen.
Moreover, storing crypto assets safely is not as easy as it is to own stocks or bonds. While cryptocurrency exchange platforms make the processes of buying and selling cryptocurrencies easy, many investors do not want to keep their crypto assets stored on these exchanges because of the risks of cyberattacks and theft.
Offline “cold storage” options, such as paper or hardware wallets, is what most cryptocurrency holders prefer. However, these come with their own set of problems. These wallets can only be accessed with your private key and if you lose it, you will never be able to access your crypto assets stored on these wallets.
Moreover, there are no guarantees that the cryptocurrency you choose to invest in will succeed. There are many new blockchain projects and thousands of cryptocurrencies available in the market. The competition in the crypto market is fierce and no one can say for sure which cryptocurrency project will ultimately flourish. It is important to note that there are some projects that are nothing more than scams.
Many regulators see these decentralized blockchain-based cryptocurrencies as a threat and regulators might also crack down on the entire crypto industry. However, as of today, most people view cryptocurrencies as just an innovative technology.
The crypto market is relatively new and based on technology that was introduced not so long ago, this increases the risks for investors. Much of the technology is not yet extensively proven in real world scenarios as it is still being developed.
Adoption of cryptocurrencies
Despite the risks that we’ve discussed, the crypto industry continues to grow. With the help of blockchain technology, much-needed financial infrastructure is gradually being developed that provides investors with the tools that can help keep their crypto assets safe.
As the crypto industry is expanding, more and more businesses and online merchants have started to accept cryptocurrencies as means of exchange. Moreover, financial giants, such as PayPal with its massive user base of more than 370 million, are allowing users to buy and sell crypto assets on their platforms. On the other hand, many other companies have invested millions of dollars in cryptocurrencies. For instance, Tesla invested $1.5 billion in Bitcoin in early 2021.
However, the first cryptocurrency Bitcoin came out in 2009 and the crypto industry is believed to be in its “infancy stage”. While other factors still make it risky to invest in cryptocurrencies, the growth and adoption of cryptocurrencies are signs of the crypto industry maturing. The success of any cryptocurrency project will depend on widespread adoption, especially in the long run.
How profitable is it to invest in Bitcoin?
Bitcoin is the largest and the most well-known cryptocurrency around the world. Many people view it as digital gold because of the huge increase in its price value in the last couple of years. Those who invested in Bitcoin 2 or 3 years ago, when the price value of one Bitcoin was less than $1,000, have made huge profits. In case you don’t know, the price value of one Bitcoin today is around $35,000.
Many people trade Bitcoin in order to take advantage of Bitcoin’s volatility to make small amounts of profits more frequently. Traders buy Bitcoin when the price is low and sell when it goes higher. The processes of trading can be made even simpler with the help of apps that offer automated trading, such as BitIQ (bitiqapp.com). Such apps take into account different factors that can have an impact on the price of Bitcoin and automatically perform trades on behalf of the users. These apps are extremely helpful if you have little or no experience and knowledge of the crypto markets.
Unlike the fiat currencies, Bitcoin’s supply is fixed and investors believe that the price of cryptocurrency will continue to grow. Crypto enthusiasts say that Bitcoin has the potential to become the first global cryptocurrency and its price value could reach $100,000 in the near future.
Should you invest in crypto assets?
Ever since Bitcoin was launched, Bitcoin or any other cryptocurrency project has shown almost no price correlation with any stock market, so investing in crypto assets can increase your portfolio’s diversification.
Taking into account examples of investors who have made millions through investing in cryptocurrencies, it would not be wrong to say that it makes sense to buy some crypto assets. However, investing in crypto assets is still very risky. Just like it is with every other investment, it is important that you do your homework and be sure that you’re ready to invest in crypto assets.
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