Digital currencies are surely gaining the upper hand in this age of industrialization and modern advancements in technology. Not only in terms of their use but also in terms of assets for investment, digital currencies are topping the charts as no other asset has done ever before. These assets are called cryptocurrencies and they are taking the market by storm!
There are many skeptics surrounding the arena of cryptocurrency and people are being cautious before making their investments, and rightly so! The area is pretty unstable and untapped at the moment. This, mixed with the volatile nature of the market, results in people asking questions about whether or not it is worth it to invest big amounts and hard-earned money into such an erratic market.
If you are looking to buy cryptocurrency, it is natural that these questions would also arise in your head at some point in time. When the time comes to make certain decisions, it is always better to have a pros and cons list to be able to get a holistic picture of what you might be getting into. Here are some advantages and disadvantages of investing in cryptocurrency in today’s times:
Advantages of Cryptocurrency – The fact that thousands and lakhs of new and enthusiastic investors are looking to invest in this sector of the market and the arena is booming with individuals scrambling to get their hands on certain cryptocurrencies speaks volumes about how popular this sector is.
- Potential for high rewards – There are 10,000+ cryptocurrencies present in today’s market, and not all of them would be as rewarding as the others. Each crypto, however, has its quirks and qualities that make them enter the market in the first place. They have one thing in common which is the highs and lows in prices. Suppose you are looking to buy Ethereum in India, if you had invested early on, you would have reached a very high price in mid-2021.
- Security – The blockchain mechanism that cryptocurrency uses is highly secure and cannot be tampered with. The infrastructure that supports and backs the whole ecosystem on which cryptos are based is permanent and cannot be erased. The records are stored on the millions of devices operating on the same blockchain. The information is sealed for good.
- Transparency – One of the primary reasons for people entering this asset market would be the fact that no third-party interference would take place when dealing with money. You would be in total control of the amount you are spending.
- Trades around the clock – With traditional banks – private or government, there is a start and stop time to when transfers can be made. The crypto markets are always open and with new coins being mined every hour, you do not have to wait for it to be 9 am before you start making your trades.
- Beats inflation and its risks – Since the cryptocurrencies are not tied to a single economy, their price would reflect the global demand. For many cryptocurrencies, since the number of coins has an upper limit, the amount cannot spiral out of control. Therefore, lesser risk of inflation
Disadvantages of Cryptocurrency – All that glitters may not be gold! There are a few risks associated with investing in cryptos as well. The drawbacks can, at times, cause major setbacks to people if they involve large sums of money.
- Complicated to understand – For people, especially not well-versed with the financial sector, it can take some time to get used to the terminology and nuanced criteria associated with cryptocurrencies. Blockchains, metaverse, etc can just make things more confusing. Investing in something you do not understand can always be risky
- Very volatile – This is the first thing that newcomers are cautioned against – the extreme volatility of the market. As high as the prices can go, they can also fall with the same plunge and in an erratic manner. If the markets crash, there would be no way for you to recover the money unless you wait for the climb to begin again.
- Questionable for the long term – While they are still not very settled, many people question the long-term feasibility of the crypto markets. No one can truly predict what the future might hold for cryptos and therefore, keeping money in such an environment can get slightly hassling
- Security risks – Since most transactions happen online, e-wallets can be at serious risk of security breaches and hacking. There would not be any central authority that you could go to for claiming the lost money. This can get highly troublesome.
There are pros and cons to any decision that you might make in your life. It is up to you to decide which ones are worth it. With cryptos, you can choose to play it safe by investing small amounts in the beginning.