It’s becoming a trend to invest in cryptocurrencies, and common thinking is that we can be millionaires overnight, but that’s not true; like other investments, there is a certain risk and sometimes more risk compared to other investments. You can make potential money and also lose all your money.
What is Cryptocurrency?
Cryptocurrency is a digital asset that people use for investment and online purchases. You can exchange real currencies such as U.S. dollars to buy “coins” or “tokens” from specific cryptocurrencies. There are many types of cryptocurrencies. Bitcoin is the most popular, but Ethereum, Bitcoin Cash, Litecoin, and Ripple are some of the others. Various large technology and financial companies hope to get a cup of crypto. Even Facebook has created a cryptocurrency called Libra.
How Cryptocurrency works?
Cryptocurrency is an exchange between person to person without any government involvement and middleman. It is decentralized, and nobody can control it except market supply-demand.
Is Cryptocurrency a reliable investment?
It is important to remember that no investment is completely safe. Cryptocurrency also has a certain amount of risk involved. But they have again proven to be a remunerative investment for many people nowadays. Cryptocurrency can be safe if we take some majors; otherwise, they might be hacked.
Buying and selling are not risky if traders understand the market and handle the coins with care. At that time number of options are available, but not all the options are safe. Taking some precautions is mandatory before investing your money in cryptocurrency. It is essential to check the coin creator’s background, whether he is affiliated with some well-known brands, check the screening process is meticulous or trading on safe exchanges.
Failure to adopt best practices to manage currency to prevent hackers from intruding can have serious consequences. With the increasing popularity and widespread adoption of cryptocurrencies, they have attracted the attention of cybercriminals. In the past few years, there have been several high-profile cases in which cryptocurrency owners lost or were unable to recover their currencies. The disadvantages of digital or virtual currencies that the central bank or the government does not support. Therefore, a very simple solution to prevent losses due to unauthorized access is to store the encrypted currency in an offline device (such as a “cold storage” device).
There is also risk by the governments because if you invest in the cryptocurrency for being innovative, the government feels the threat and declares it illegal to lose your money. No one monitors cryptocurrency, so criminals can use this platform to pay and also corrupt people can make their black money to white.
The blockchain industry is getting stronger every day. Much-needed financial infrastructure is being established, such as institutional-level custody services and futures markets, which provide professional and individual investors with the tools needed to manage and protect crypto assets. Financial giants such as PayPal and Square can easily buy and sell cryptocurrencies on their popular platforms.
Large companies such as MicroStrategy and Square have co-invested hundreds of millions of dollars in Bitcoin and other digital assets. Tesla (NASDAQ: TSLA) purchased $1.5 billion worth of bitcoin in early 2021 and planned to accept the token as payment for its cars. These companies and more and more individual investors see the potential of cryptocurrency. They believe that the industry has matured to the point where it can safely invest in large amounts of crypto assets.
Is Crypto is a good investment?
Traders who invest for the short term they not care about the utility of cryptocurrency. They are more concerned about the price history of the coin. For example, short-term investors buy doge coins with no competitive advantages over big cryptocurrencies like bitcoin. Seeking to make a quick profit, these kinds of traders buy doge coins for their high volatile nature.
If you believe in blockchain technology, cryptocurrency is a great long-term investment. Bitcoin is considered a store of value, and some people believe that Bitcoin could replace gold in the future. Ethereum, the second-largest cryptocurrency by market value, also has enormous growth potential as a long-term investment.
If Bitcoin were to run on cryptocurrency as a computer uses it, Ethereum would be the internet. Ethereum hosts decentralized applications (dapps) that allow people to use Ethereum for more complex financial transactions, such as loans, insurance, and derivatives. Dapps can also be video games – playing the game on Ethereum allows users to buy and sell game items from each other using the blockchain.
Before investing in a cryptocurrency for the long term, make sure you understand what you are investing in. Find out what problem the cryptocurrency is trying to solve, and then assess whether there is an advantage in using blockchain technology as part of the solution. Some cryptocurrency companies create a token to raise funds from unauthorized investors easily, and there is no competitive advantage for your company to operate on the blockchain.
The values of cryptocurrencies are highly volatile. In 2017 bitcoin value swung from $900 to $20000. This shows how explosive they are. In other words, the risk involved in cryptocurrencies is too high; it might pay sometimes but also have a downside; according to some investors, it’s just like playing poker with your financial future.
Cryptocurrency trading is like gambling. Since they are exchanged peer-to-peer and have nothing to do with regulatory standards, their value has no upward or downward trend. You can’t predict changes or calculate returns like you develop a stock mutual fund. There is not enough data or enough credit to create a long-term investment plan based on cryptocurrency.
There are two blocks; one supports cryptocurrencies, and the other doesn’t. According to Warren Buffet, cryptocurrency is a bubble one day; it explodes, and all went down, but according to Bill Gates, cryptocurrency is the future of the world.