Over the past ten years, many people have started investing in cryptocurrencies, which are now widespread. And with Bitcoin as its most well-known digital currency.
Recent stats show that crypto’s user base increased by almost 190 % between 2018 and 2020, only to grow further in 2021.
With such growth in users, you’ll see a range of reasons to invest in it. But investing in crypto carries various risks as well. One such risk is its volatility, where Bitcoin Kurs tends to fluctuate.
You will only be worried for a short time if you are still worried about the risks. The reason is that once you discover the benefits, you’ll forget about your worries and invest.
However, it is good to still know about crypto before you invest in it. This article will give you an overview of the pros and cons of investing in crypto. Read on.
What Is Cryptocurrency?
Whenever you hear the word “cryptocurrency,” virtual money should come to your mind. The reason is that it is the primary concept behind crypto.
Cryptocurrency, also called “crypto,” is a type of digital money that one can use as a store of value and a means of exchange.
Crypto uses blockchain technology to keep records of transactions in a ledger platform. The key feature of this tech is that one can view it publicly but can’t alter or control it.
For that reason, crypto is brutal to falsify and very secure to use for online banking.
There are many types of cryptos but below are the most popular.
- Bitcoin
- Ethereum
- Bitcoin Cash
- Ripple
- Dogecoin
Cryptocurrency: The Pros and Cons of Investing in it
Before investing or engaging in Bitcoin trading, there are various vital pros and cons you need to know. Here, you’ll get a detailed explanation of both of these things. The reason for this is to calm many of your concerns.
Pros
A Potential for Fast Gain
The Bitcoin Kurs can fluctuate on a monthly and even daily basis. For example, the price of Bitcoin was $975.70 in March 2017 and shot up to $20,089 in December in a few months. A few years later, in April 2021, the price of Bitcoin rose to an all-time peak of $64,000.
This proves that despite the high price volatility, crypto users see this as one of the pros of Bitcoin, as it can produce a high return potential.
Also, as more users begin to see Bitcoin as a successful world currency, many investors and firms will decide to use it. As a result, this will increase the potential for a huge return, especially for folks who purchased it for less money.
Moreover, other investors think Bitcoin will continue to appreciate over the long term. The reason for this is the 21 million coins fixed supply limit.
No Third Parties
The absence of third parties is one of crypto’s defining traits. The financial system is mainly based on mediators that carry out transactions. And many clients don’t think it is wise to trust one or more of these middlemen while making a transaction.
However, there is good news for these clients. Crypto’s blockchain tech has come up with a solution. Blockchain tech improves and lowers the cost of funds transfer for clients. As a result, clients will be able to save more.
Also, you can perform transactions without any mediator involved. Finally, each transaction is well secured, with secret keys only known to you.
Anti Inflation
Many currencies have lost value over time due to inflation. However, crypto is now considered a potential inflation hedge for months.
The logic behind it is that national banks and the government do not oversee cryptocurrencies. Therefore, they are immune to inflation.
Most cryptos, like Bitcoin, have a limited supply that gets released at a time. It is unlike cash, where the banking system may keep producing money.
On that note, only 21 million Bitcoins get released worldwide. This number is according to the ASCII computer file. The ASCII handles listing the quantity of each coin.
As a result, as demand rises, its value will also rise, helping keep the market stable and preventing inflation in the long run.
Accessibility
One of the main benefits of cryptocurrencies, including Bitcoin, is that they more often have no territory. There are no market hours for cryptocurrencies, unlike the stock market. As a result, you can purchase or sell cryptocurrency whenever you choose.
For this reason, crypto is popular among traders, so they trade with it at any time. As a result, Bitcoin became a versatile currency.
Finally, traders can change it to any currency at a low rate to do their business.
Cons
Very Volatile
Any form of payment that has a pretty stable price is ideal since it makes holding it and putting cash in it less risky. However, crypto prices are far more erratic than other assets like stocks and bonds.
Then again, rapid price gains result in high-profit rates for crypto investors and holders. But with rapid price fall comes major losses for crypto investments.
Crypto markets get deeply affected by rumors or economic and geopolitical changes. For example, news of Tesla CEO Elon Musk’s decision in May 2021 that Bitcoin would no longer be accepted as a form of payment due to climate concerns. That decision caused Bitcoin to fall over 10%
However, it’s only wise to invest if you can keep a close check on changes in the world economy and act swiftly to limit potential losses.
High Cost of Production
One of the myths of cryptocurrency is that anyone with a PC and an internet service can mine them. However, mining famous cryptocurrencies uses energy, maybe as much as an entire nation consumes.
Bitcoin is often the biggest offender here. One will need advanced computing power and a lot of energy to mine it. This is the reason why one can’t mine it with standard PCs.
Study shows that to mine a single Bitcoin transaction footprint, it takes energy of about 1167.04 kWh, which is enough to power a house for 40 days.
Also, these advanced machines cost thousands of dollars. So imagine a Bitcoin mining facility containing many of these machines that will cost millions.
Finally, the mining of Bitcoin also affects climate change due to its use of fossil fuels.
No Refunds
If there is a dispute between concerned parties, or if someone sends funds to the wrong wallet address, the coin can’t get retrieved by the sender. As a result, many folks will use it to cheat others out of their money. Since there are no refunds, one can easily create a transaction whose product or services they have yet to receive.
Bottom Line: Is Crypto Worth Investing in?
Like other investments, investing in crypto involves some detailed study. Examining a list of cryptos’ pros and cons is just the beginning. And, of course, the pros outweigh the cons.
You can also study the crypto market and its linked promises and risks. Now that the ball is in your court; make a good investment. Good luck.
