With trillions of dollars invested across and outside the countries and with the hype that cryptocurrencies and new crypto projects are being rolled out daily, the question that should be raised here is whether cryptocurrencies are good investments. Is it worthy or wise to invest in cryptocurrencies? With the scenes of overnight loss and overnight/steep winning, would the investors still consider putting tier money into the market?
Core concepts
To grasp the core concept of crypto, it's essential to understand the technology that powers it. This concept includes decentralized tokens, coins, blockchains, and more.
Blockchain is the technology that exists behind cryptocurrency and Bitcoin is the name that was first coined in cryptocurrency and first created in blockchain that everyone knows. Cryptocurrency can also be the medium of exchange like any digital currency and fiat money such as Indian currency and US Dollar.
Cryptocurrency utilizes cryptographic techniques, one of the computer-generated techniques that further control the creation of monetary units.
What is blockchain technology?
A blockchain is a decentralized system having or accumulating all the transactions within the network. There is no central clearing authority and no interference of any authority like the controlling power that maintains the regulation of fiat money. The blockchain applications include -
Sustainability,
Tokenization,
Fund transfers,
Supply chain tracking and
Many other areas.
Advantages Of Cryptocurrency
While cryptocurrencies are recent inventions (where Bitcoin was regulated or came in 2009), there are many benefits to staying with cryptocurrency as many countries have accepted the name, regulation, and money transfer system of Crypto. Crypto has plenty of things to offer and it further includes -
The potential for high rewards
To date, there are at least 10,000 cryptocurrencies that are being regulated in the financial markets. In addition, every kind of crypto token and crypto coin has its own merit and demerit. Plus, every kind of crypto tends to have a sudden spike and fall in value. There are more chances of receiving more returns than the regular or other common funds like mutual funds, etc. For example, Ethereum - the blockchain system has got its price doubled from July 2021 to December 2021. Afterwards, the price suddenly falls with a reduction of €1,000 and an overall 70% since Christmas 2021.
The blockchain technology utilizes the kind of technology that is highly secured
In the case of cryptocurrency, it is not the infrastructure that is linked to it but the technology that makes it more strong. The cryptocurrency which comes under the blockchain system tracks every transaction. In addition, the blockchain is decentralized and is stored across multiple computers. Furthermore, it becomes difficult to access the entire chain and once and do hacking.
In Crypto there lies trading around the clock
Crypto markets are always open which is opposite to the regular trading market. So, you do not need to wait like in the case of the closing of trading systems like NYSE, NASDAQ or any other exchanges. It stays open during normal working hours which makes the best way to generate higher returns.
Cryptocurrencies help investors beat inflation
Since normal fiat currency, let’s say, the Indian rupee is based on the dollar’s inflation and the value of dollar inflation depends on the price value of raw oils and minerals, the national inflation is there in the market. In addition, if national inflation takes place, the country’s currency value also changes and this further creates an impact on the trading market.
But, in the case of cryptocurrency, it is not attached to a single currency or its value. Their price reflects the global demand. The value that lies within the cryptocurrency is capped, so it cannot be out of the control of the central authority and thus creates no inflation or controls the inflation also.
Accessibility and Financial Inclusion
Cryptocurrencies have the potential to provide financial services and work without any interference from any kind of bank. With just a single use of a smartphone and with portable internet, you can have opportunities for economic empowerment and inclusion.
Disadvantages Of Cryptocurrency
There are merits and demerits of every single thing in this world and so that is retained by the cryptocurrencies.
Understanding cryptocurrency takes time
You will have to put lot of hard work to understand the cryptocurrencies and their pattern. If you are not completely aware of the digital world and its potential, you cannot completely have an understanding of cryptocurrency and its nature. In addition, if you are investing in something that is not understandable to you, it is itself a huge risk. You may get a lot of things on the internet but still, you will have to spend time to understand the pros and cons of crypto.
Cryptocurrencies involve volatile investment
Once you have gained the increment, it will give you high benefits at once. The same is true if you will see if there is any kind of decrement. So, if you are looking at something that might give you stable returns, it cannot be the one where you should invest!
Cryptocurrency thrives on speculations, so the area that controls the fundamental system of blockchain is relatively small. Thus, the price fluctuation is vulnerable. This makes the major drawback of cryptocurrency that further can make the value of the coin low, extremely low, high or extremely high.
No one has seen a long-run increment in cryptocurrencies, yet.
While cryptocurrency has been popular for over a decade, it cannot devote the same time and energy the investors have seen in the case of other trading systems like mutual funds, the stock market, etc. In contrast, the stocks have been on the run for centuries (founded nearly 1801 with the name of London stocks).
Crypto has serious scalability issues
Imagine a situation in which you have no easy access to the internet. Let’s say that on that particular second, you have lost your connectivity with the blockchain or cryptocurrency that you were operating. This is where the great limitation comes into existence. Plus, it can be frustrating at one point for a regular user.
Crypto newbies are vulnerable to security risks
Since there is an involvement of passwords, email IDs, and internet use and if there comes phishing, hacking into it- it can create disasters. The new users can be more vulnerable to these kinds of traps.
The rules and regulations of cryptocurrencies are not the same for all the citizens of all the countries
There lies a space limitation for the users of cryptocurrencies within the country. For example, India has not made crypto a legal authority within its boundary, but the USA has accepted it and at the same has not given a legal regulation to it, across all the states.
Conclusion
Is Crypto Actually a Good Investment? – this is still a question because it depends on the speculations within the market. In addition, if you can tolerate losing everything at once that you have invested, then you can have an investment in it. At the same time, it doesn't suit those who are thinking of having savings and increasing their portfolio after retirement or in old age. It is rather a digital asset that requires the knowledge of the complete digital world and is also vulnerable to high risk, which further needs to be understood.
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