What is cryptocurrency investment? Investing in cryptocurrency, as well as its pros and cons. How can one start investing? Is it safe to invest in cryptocurrency? Will this make you a good income? What is the danger? Let’s find out as we go.
Cryptocurrencies have been around for over a decade. And since the development of Bitcoin, it has been slowly but steadily gaining attention.
The idea of investing in digital currency was almost unimaginable in the past, today, the tables have completely turned. Nowadays, cryptocurrencies are becoming a viable addition to anyone’s investment portfolio, just like stocks and assets.
In fact, some investment banks are now considering offering cryptocurrency investments to custodians. And the fact that the process of investing in crypto is getting easier these days only helps to increase its value even more.
In this article, we will discuss the basics you need to know if you want to start your own cryptocurrency investment. Also its advantages and disadvantages.
A quick trivia: Did you know that the concept of cryptographically signed digital money predates Bitcoin by nearly three decades?
David Chaum first introduced the concept of eCash in 1983, although it was fully implemented in 1995 through his company Digicash.
Bitcoin, the currency that started all this craze, was revolutionary for its time as it was the first crypto-signature digital currency that was completely decentralized.
This means that there is no central authority or any major bank that manages and monitors its circulation. This is in contrast to the US dollar, which is monitored by the Federal Reserve.
This is achieved using an innovative record-keeping technology called “blockchain”, which acts as its own public ledger.
How to invest in cryptocurrency?
Now that you have seen the pros and cons of investing in cryptocurrency and decided to jump in. Here are your steps on how to start your own crypto-investing.
Calculate Your Risk: Any investor should be familiar with the saying “invest at your own risk”. This applies to any type of investment, but here is the more important point.
Due to the highly volatile nature of cryptocurrency, don’t make the mistake of investing all your money in it. Instead, try to set a safe price that you can manage, so that if it crashes, you won’t lose all your money.
Choose your cryptocurrency: Obviously, Bitcoin should be your first choice if you are going to invest in one type of cryptocurrency. But if you’re looking to diversify your crypto-investments, Ethereum is a somewhat stable option at the moment (though still inherently volatile). Or you can add Dogecoin if you want to follow the current trends at the time of this writing.
Choose your platform: The most popular cryptocurrency trading site right now is still Binance Coinbase. But recently,
other crypto-platforms are also available if you want. Another platform, Robinhood, specializing mostly in stock trading, started accepting cryptocurrency investments in 2018.
Although they are called “wallets” in a sense, they don’t actually store your accumulated cryptocurrency. Instead, a crypto-wallet is a software program that stores the private and public keys that you need to access the blockchain, where your cryptocurrency is stored. There are different types of wallets for your specific needs (online, hardware-based, mobile, desktop, etc.).
Cryptocurrency Investment Pros
You have complete control over your money: The decentralized nature of cryptocurrency means that it is owned by no one, and at the same time by everyone. You have full ownership of the cryptocurrency you own, and no one can take it away from you. Unlike regular money, the final decision on what to do with your money rests with the banks. And yes, that might mean turning it off.
It is a universal currency: A regular currency such as the US dollar has a value only within a specific jurisdiction that the central bank dictates. With cryptocurrency, it shares the same value wherever you go, be it another country or another. Moreover, the adoption of cryptocurrency payments for many products and services is increasing day by day.
It has high flexibility: with conventional money, banks usually have to wait a few days for the transaction before crediting you. Also, most banks are not open all the time to process your transactions. With cryptocurrencies, any transaction or exchange takes minutes, even seconds, to complete completely. You can buy new assets when prices are low, or sell them when prices are high. Moreover, the crypto-market is open now and then and its liquidity is limited in circulation. Resistance due to supply is outstanding. And some cryptocurrencies have a fixed limit coin that imposes a supply cap once it is created. This is necessary to protect their values.
Easy to invest: With regular money, you need to do a fair amount of paperwork and even time before you start investing. With cryptocurrency, all you need to do is create an account on any cryptocurrency investment site, set up your wallet, and that’s it.
Cryptocurrency Investment Cons
Despite the many advantages of cryptocurrency investing, there are still some drawbacks that some need to take into consideration before getting started.
It’s highly volatile: While cryptocurrency trading prices can soar in such a short period of time (sometimes instantly), the opposite is also true. The Great Crypto Crash of 2018 is one of the most notable examples of a sharp drop in the value of cryptocurrencies. While this is nothing new for long-term investors (who prefer to invest in such volatile assets), it can be detrimental to new investors who don’t know what they’re doing. If you are not careful, you can easily do heavy damage.
It has no intrinsic value: Remember that cryptocurrencies were originally created as a medium of exchange, not as an investment asset. Therefore, it has no intrinsic value in itself. It has value only when the collective interest says it has value. This is unlike other investment assets such as stocks, whose value is determined by the public company behind that stock. Without an underlying asset, cryptocurrency is prone to huge price swings (hence its volatility).
Negative environmental impact: The huge demand for cryptocurrency just creates one more incentive for me. Cryptocurrency “mining” is a process in which computers are used to solve complex calculations within a blockchain, which becomes more computationally intensive as it progresses. In fact, Bitcoin mining uses more energy than the entire country, which can leave a huge carbon footprint on the environment. Although steps are being taken to reduce the environmental impact of crypto-mining, you can avoid investing in cryptocurrencies if you want to contribute to protecting the environment.
Once you set up your cryptocurrency investment platform, that’s it. Keep in mind that cryptocurrency investments are not for the faint of heart due to their very volatile nature. And if you don’t monitor it carefully, you can lose all your invested money too.
All investments are like gambling, but here in crypto, it is clearly evident. But if you are willing to accept the risk, investing in cryptocurrency can give you huge returns in the long run.
They are highly resistant to inflation: crypto currencies maintain their value and strength over time. Its inflation.
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