Is Cryptocurrency a Good Investment? The Pros & Cons
In this section, we’re going to answer the question - is cryptocurrency a good investment?
If you’re reading this, it’s probably no secret that you’re interested in cryptocurrencies. As you should be - the crypto industry has seen some unparalleled growth over the past few years!
That said, however, online, on social media platforms, there’s a constant mixture of good and bad news surrounding the crypto space. One day the market is experiencing unprecedented growth, while the other - everything’s crashing down rapidly! All of that might lead you to wonder - is crypto a good investment?
In this section, we’re going to talk about investing in crypto. To be a bit more specific, we’ll address the questions of what’s the general appeal of crypto, to begin with, what are the pros and cons of investing in this industry, and wrap things up with a clear conclusion, too.
Without further ado, let’s get to it!
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Is Cryptocurrency a Good Investment? (5 PROS & CONS!)
What’s the Appeal of Investing in Crypto?
So, naturally, the first question that we should look into is this - what’s the actual appeal of investing in crypto, and why do so many people do it nowadays?
Well, as you might probably expect, there isn’t a single answer to this question. Let’s still look at some of the more-common ones, however.
First of all, cryptocurrencies are still relatively new. This opens them up to being a very speculatory asset class - no one really knows how much a crypto asset “should” be worth, and thus, there’s potentially some money to be made, if you’re lucky enough!
Imagine it like this - let’s say that scientists have just discovered a new form of apples. These apples are super-healthy, juicy, delicious, and can stay fresh for a very long period of time. How much would an apple like that be worth?
Well, straight off the bat, no one would know! Do these apples have any downsides? Are they rare, and difficult to grow, or maybe in a year or so, everyone will have this type of an apple tree in their garden? Again - there’s a lot of speculation involved, and the price of that apple might sway quite a bit!
Same as with those apples, people love to speculate about certain cryptocurrencies, as well. Which of them will grow in price, and which will fall? How can you maximize your potential returns? These and many more questions lead people to wonder - is cryptocurrency a good investment?
Another big reason why certain individuals might want to invest in the space is simply because it’s an innovation. As I’ve pointed out a few times already, crypto is still very new - as time goes on, though, it’s becoming increasingly more adopted, by the day. Some people might simply enjoy being “ahead of the curve”, and want to participate in this technological advancement, as early as possible.
A common example here would be the internet, in the early 2000s. When it just came about, there were countless numbers of skeptics who thought that it’s just a fad, and that it would go away in a few months or years. Well, as you probably know, the reality is very different! Many people hope that the same will be true with crypto, too.
There are multiple additional reasons for why individuals are wondering - is cryptocurrency a good investment? That being said, though, if you’re one of those people who strive to be an early investor, simply because you love the technology behind the concept, make sure to check out other sections on our Crypto 101 Handbook - there are countless sections about all-things-crypto, to help you understand the space better!
The Pros & Cons of Investing in Crypto
Moving on, let’s now take a look at some of the biggest pros and cons of investing in cryptocurrencies. Once you have them laid out clearly, in front of you, the decision will be much simpler to make!
Let’s start with the pros.
The very first benefit of investing in cryptocurrencies is the joint anonymity & transparency factor. When you invest in crypto, you are able to remain completely anonymous while doing so, if you wish to.
These days, with regulations getting stricter, it’s something that’s becoming increasingly more difficult to do. However, crypto enthusiasts still find ways to achieve at least partial anonymity - it all depends on just how far you’re willing to go!
Transparency is another key factor to consider, in that equation. Cryptocurrencies are based on blockchain technology, which is, by default, transparent. Unless we’re talking about some niche private blockchain, public ledgers will allow everyone to come in and check the code behind them, and search for various potential bugs and issues.
All crypto transactions that are performed on such blockchains are public, as well. However, they won’t have your name attached to them - instead, only your wallet address will be shown to the observer, which does, once again, prove the anonymity aspect of the entire ordeal.
If you’d like to learn more about how all of this works, you can check out the section on blockchain decentralization and anonymity - I go more in-depth into this topic there.
Next up - the chance to earn huge returns on your investment.
Yes, this one’s a bit obvious, but it can still be considered somewhat of a benefit, or a “pro” of investing in crypto. That’s simply because there isn’t any other popular financial field that would allow you to earn such potential returns!
A large part of the crypto appeal is the fact that this industry has managed to turn multiple people into millionaires, overnight. It’s like you playing in a lottery, but one that would allow you to increase and decrease your odds, depending on how well you’ve done your research.
Of course, everything is never as simple as it seems, and there are huge downsides that accompany this factor, as well. We’ll talk about them later, though - for now, just keep in mind that many people would answer the question of “should you invest in crypto?” by giving you this very reason to do so - the potential for huge returns.
Moving on, another huge pro of investing in cryptocurrencies is the fact that, as I’ve pointed out earlier, there are seemingly countless ways to do so. And no, I’m not talking about using different exchange platforms to buy your crypto - instead, I’m referencing the variety of choices that this space houses.
If you want to take the “traditional” path, you COULD go ahead, register on an exchange, and purchase crypto this way. On the other hand, there’s also the DeFi (or, decentralized finance) space to explore, with all of the different services that it offers. Then, there are NFTs, which are a whole separate world, in of themselves.
These few categories then split off into a huge array of smaller subcategories - crypto borrowing and lending, advanced trading tools, royalty earnings with NFTs, different investment strategies, DAOs, and so on, and so forth. Each of these topics deserve a separate section of their own - I’ve already covered quite a few of them in our Crypto 101 Handbook, so don’t forget to check it out!
One more huge “pro” of investing in cryptocurrencies is the fact that this financial field is often considered to be much more approachable than traditional finance, at least for the younger generation. That’s due to the fact that crypto is constantly popping up in various pop-culture events, especially when it comes to memes.
Think about it yourself - Elon Musk and his support for Dogecoin, the surge of animal-themed coins and tokens, that whole situation with the WallStreetBets subreddit, and so on. Combine that with the fact that you can start investing in crypto with as little as a few dollars, and you can see why many people from the younger generation are wondering - should I buy crypto?!
With all of that being said, however, we couldn’t really finish off this section without talking about the negative aspects of investing in space, too. At the very top of these cons, you will find market volatility.
It’s something that I’ve explored earlier when talking about the appeal of crypto. Remember that example with the special apple? Well, sure - the price (or, worth) of that apple could go up, and make you a lot of money! However, it could also crash down, when you find out that all of your friends and neighbors have also acquired a huge amount of these apples.
The same is true with crypto, as well. With it being so new and, frankly, still poorly regulated, no one really knows how much this technology is worth, and the speculatory nature of this ordeal can really put a dent in your wallet! Say, you decide to buy BTC when it’s worth $60,000, only to find that it has crashed all the way down to $30,000 the next week. That’s not a nice feeling to experience, especially if you only wanted to make a bit of profit, and aren’t “in it” for the long run!
Another big con that you should consider before investing in crypto is that this space is still not properly regulated, in most areas around the world. Governments are trying to change this, but these bureaucratic processes are usually very slow and tedious.
Why does this matter? Well, it’s very easy to get scammed, or face tax-related issues when you’re dealing with an unregulated financial market. There are little-to-no fail-safes, and you become completely responsible for whatever happens to your assets. It requires a lot of knowledge and time in the market in order to make the smartest possible decisions!
To finish off, let’s wrap it up by stepping back, and taking a look at the question - should you invest in crypto?
Well, I believe that cryptocurrencies & crypto technology is a really cool innovation, and one that’s still very young. This means that there are going to be a lot of issues associated with it, and a lot of things that still need to be figured out. I mean, you could say that one of the cons of investing in crypto today is the fact that there are still very limited use cases for this technology!
As time goes on, though, it’s obvious that crypto is becoming more and more adapted into our everyday lives. If you’re a fan of innovations, this is super-exciting! Whatever the case might be, however, and whatever you might decide to do, just keep in mind that, as of me writing this section, the space is still quite unpredictable, and you need to be very cautious with everything that you do!