Have you been thinking about investing in cryptocurrency? If so, you’ve probably had some lingering doubts about the supposed drawbacks but been lured by many of the obvious advantages. It can be hard to weigh the pros and cons for an asset type that’s still relatively new, like virtual money.
In a market that’s almost constantly changing, with new coins making their debut every few months, it’s not surprising that investors are confused
In fact, it’s only been about a decade since the majority of the current “top five” cryptos have even existed. In a market that’s almost constantly changing, with new coins making their debut every few months, it’s not surprising that investors are confused.
Here’s a short look at three pros and three cons of investing in crypto. Everyone has their own personal style and preferences, so view each item on the list in terms of your own needs.
Pro: Volatile Prices
If you like the idea of unlimited potential profits, crypto is the place to be. Yes, with unlimited upside, there is also a risk, but it’s a much better place to park your investment capital compared to the stock market if you want to have the chance to get some outsize returns. That’s mainly because crypto is truly in its infancy. Just look at what’s happened to some of the market leaders, like Bitcoin. As social acceptance for crypto grows, profits could be massive.
Con: Volatile Prices
The other edge of the volatility sword is a “con.” If you’re the type of investor who likes nice, smooth price charts with little daily variation, then cryptocurrency is probably not the wisest move for you. Even on good days that end at higher prices, it’s possible that there were some major swings, both upward and downward, throughout the day. If you are averse to volatility, then try stocks, bonds, and precious metals instead.
Pro: Diversification Possibilities
Withing the crypto-currency segment, it’s now possible to diversify among the many offerings. That’s because, as the market ages, new entrants tend to stick around longer. Some of the ones with staying power, like Litecoin and Ethereum, are just two other places you can invest in addition to Bitcoin. Why put all your virtual currency eggs in one basket? Spread your capital, and your risk, around to several coins to diversity your crypto portfolio.
Con: Secure Storage of Coin
One of the big challenges people have with virtual money is storage security. There are numerous ways to approach this situation. One of the most secure methods is using offline storage of all your alternative coins. This is not the most convenient way to operate, but it is the safest. Online wallets and accounts are subject to hacks, server malfunctions, and other problems, even though those are infrequent.
Pro: Increased Economic Acceptance
In the past year, some of the major economic players in the world have begun accepting cryptocurrency as a form of payment and a means of storage. PayPal is just one example, as are dozens of giant online retailers. Plus, more and more local and international banks are allowing their customers to set up crypto-currency savings and checking accounts.
Con: Potential Total Loss
Unlike precious metals and blue-chip stocks, cryptocurrencies can bottom out. In other words, you could, theoretically, lose your entire investment. Even when putting your capital into some of the bigger names of the niche, like Bitcoin and Ethereum, prices could theoretically sink to nothing, or near zero in a total sector meltdown.