There are two sides to every coin. Pursuing to invest in cryptocurrency is profitable and, at the same time, risky as you can lose all of the money.
Investing in cryptocurrency is good if you want to obtain direct exposure to the demand for digital currency. A better, safer, yet less profitable option is to purchase stocks of companies exposed to cryptocurrency.
Here are the pros and cons of investing in cryptocurrency.
Numerous factors make investing in cryptocurrency not purely safe, while there are other signs that cryptocurrency will stay for an extended time.
Potential risks: Cryptocurrency exchanges are prone to attacks by criminals and hackers. As a result, investors lose large chunks of their investment after these platforms have their security systems breached with digital currencies stolen.
Challenging crypto storage: Several cryptocurrency exchanges have simple systems that make the purchase and selling of crypto assets easy. However, several people do not like to store their virtual assets on exchanges because of the inherent risks of theft and cyber attacks.
There are crypto holders that choose offline cold storage alternatives such as hardware or paper wallets. However, there are issues connected to cold storage, such as the probability of losing the private key that makes access to the cryptocurrency impossible.
It is also possible that the crypto project will not succeed. Blockchain projects are everywhere, which makes competition a bit harsh. Sadly, some projects are scams in the industry. This makes achieving in crypto projects slim to success.
Governments might also consider banning cryptocurrencies in their jurisdiction to be illegal when they perceive it as a threat rather than as an innovation.
Since crypto technology is not fully developed, investors might find it risky to invest in crypto.
Acceptance of Cryptocurrency
Each kind of investment has its inherent risks, and this does not exclude cryptocurrencies and the blockchain industry. Despite these, this industry is getting stronger because of creating the needed financial infrastructure that makes it possible for investors to gain access.
In addition, institutional and individual investors slowly obtain the tools they need to monitor and protect their crypto assets. You can learn more about blockchain technology and crypto platforms here.
Companies such as Square and Paypal allow the buying and selling of cryptocurrency in their platforms, while others have invested millions of dollars in cryptocurrency such as Bitcoins. For example, 1.5 billion worth of Bitcoins was invested by Tesla in early 2021.
Although there are risks in cryptocurrency, different countries such as El Salvador have made Bitcoin a legal tender that shows the maturing of the industry. Moreover, Honduras also seeks to gain entrance to the crypto market by launching its first Bitcoin ATM.
Bitcoin, Ethereum, and other cryptocurrencies are launched with specific targets that may be obtained over some time. Any cryptocurrency project has a fifty percent chance of success and another fifty percent chance of failure. If it succeeds, early investors will be rewarded.
However, a project will achieve long-term success if there is widespread adoption.
To invest or not to invest
If you invest in cryptocurrency, this can diversify your portfolio because crypto like Bitcoin does not directly correlate with the U.S. stock market. If you think that the use of crypto will be widespread in the years to come, it would be wise that you purchase crypto as part of your diversified portfolio.
Ensure that you have a reason for every crypto that you are buying.
If you think that there is too much risk if you purchase cryptocurrency, you can find ways to gain from the popularity of crypto.
For example, you can buy stocks of companies such as Paypal, Square, or Coinbase. Investing in these firms may be profitable. However, they do not have the same potential of gaining when you invest in cryptocurrency directly.
If you plan to engage in cryptocurrency, make sure that you know the risks involved in it. If you want to learn more about crypto trading platforms, check Bitcoin Pro.