Last Updated on 2 months by Shubham Attri
Every now and then, someone comes up with a justification for cryptocurrency being the best investment medium.
There are many convincing elements to their rhetoric, and some people even start investing eagerly.
However, due to market volatility, they experience their first setback, and the newfound followers of the crypto trends suddenly lose their faith in this sector. They start telling others how crypto is not an appropriate avenue for investment.
You may have heard these stories many times in your circle. You may also know someone who advocates crypto or considers it the biggest scam of this century. Both sides are wrong because they take crypto as a simplified system when it is not. There are no promised gains or losses and no regulations in place. The market and the people who know about it can be unpredictable.
If you are either among the advocates and the skeptics or are primarily neutral about crypto, you have come to the right place, for this article will have something for you regardless of your inclinations. Our goal is to distinguish fact from fiction. We have listed some interesting points and encourage you to carry out independent research to discover the truth yourself.
Yes, crypto appears to be a promising avenue, and if you are an investor, you may feel like running a bitcoin converter to dollars every now and then to see if your investment is soaring. But the truth is that this is an efficient investment and should be taken as such, which means that unless you drop misguided notions, you are not likely to perform well in the market. With that said, here is a list of a few things to help you gauge whether crypto is worth investing in:
1. Research Is Important:
It is always good to be aware of what you are getting into. Therefore, research is a prerequisite for this market.
Not only does it help you understand what you are getting into, but it can also help you become a better trader. Considering that the crypto market reacts to external factors, it is always good to be aware of things that can influence the market.
This includes following domestic and international news to see if there is anything out there that can affect the market.
Moreover, studying the market thoroughly is a good exercise as well, for it can help you understand underlying patterns.
2. It Is Not Risk-Free:
No investment is ever risk-free, and part of the reason many people make huge sums in profits is that they are willing to risk losing their money.
This is not limited to crypto; you can see the same pattern in various other sectors as well. These people either tend to have a significant appetite for taking risks, or they tend to make smart investments.
So, you should know that crypto is a risky investment and can go either way. So, if your savings is all you have, you might want to reconsider investing in crypto because it can leave you bankrupt. However, if you have some amount to spare, you can try your luck by making small investments.
3. It Is Unpredictable:
Recently, the crypto market crashed, wiping off a massive chunk of its capitalization. This led to many people incurring huge losses and serves as an example of how risky crypto is.
But at the same time, there have been moments where the market has remained bullish for a while, leading to investors reaping huge profits. The market is unpredictable, and while you can study it and understand it somewhat, nobody can say how it will perform in the future.
So, as an investor, you need to realize that what you are investing in is something you might not be able to comprehend fully.
4. It Is Still Developing:
Unlike fiat currency, crypto is a recent phenomenon, and it will take a while to become as stable as other established currencies.
While some countries across the world have banned it, others welcome it as an acceptable source of transactions. Various places around the globe treat it as acceptable currency.
Since there are no banking costs attached and the transfers are quick, using crypto to purchase goods can be a good option, especially if you are overseas.
It is still in the development stages and should be treated as such. The risks attached to crypto are part of this process.
5. Not All Cryptocurrencies Are The Same:
Some currencies are more established than others, while some appear to be more promising than others.
As an investor, you need to make the right choice if you want to do well in this market. Your choice of cryptocurrencies should depend on your priorities and risk appetite; therefore, choose wisely.
6. A Diverse Portfolio Can Help:
As mentioned in the previous point, there are thousands of cryptocurrencies worldwide. In the presence of many options, many people invest all their money into established currencies such as Bitcoin.
Bitcoin is considered the gold standard of cryptocurrencies, considering that it was the first decentralized digital currency to use revolutionary blockchain technology.
However, there are many other established cryptocurrencies that trail Bitcoin. Moreover, there are promising newcomers in the market as well. Having a diverse portfolio of these currencies can be helpful.
Not only does this minimize the risk you face in this sector, but it also allows you to hold more assets in the long term.
It is worth reiterating here that cryptocurrency should be a valuable source of investment. The points mentioned above can help you gauge whether it is worth it.