2022 has been a challenging year for the cryptocurrency market. In the midst of the crypto winter, potential investors looked at him with apprehension. Now the situation has changed, the trend change is visible to the naked eye. Exchange rates of different coins with enviable constancy update annual highs. While it is still far from historical highs, it is not too late to exchange Tether USD to Bitcoin.
Before making investment decisions, it is worth understanding the main advantages, disadvantages and main risks of digital assets.
The Main Advantages of Investing in Cryptocurrency
High yield. Cryptocurrency investments bring more profit than any traditional asset. with all the dizzying ups and downs of the market, the underlying upward trend remains unchanged. Looking closely at the price dynamics of the most promising cryptocurrencies, you can see that every season there is a new price record. And it’s not just about Bitcoin.
High liquidity. The demand for cryptocurrencies is also steadily growing. You can sell or buy a promising coin quite quickly. That is, the investor has quite a lot of room for maneuver and the opportunity to get the most out of his investment.
Decentralization. No state institution can influence the rate of digital assets. In addition, it is almost impossible to confiscate your funds or freeze accounts.
Low entry threshold. You can start investing with very small amounts and gradually increase the volume of the portfolio at a pace that is acceptable to you.
Small material and time costs. There is no bureaucratic component in the cryptocurrency market. Since there are no intermediaries, commission costs are reduced to a minimum. other than that, you won’t have to wait long for the translation.
Anonymity. When opening a bank account, a new client is required to provide a lot of information about himself. Although many trading platforms have already introduced mandatory account verification, there are still anonymous crypto exchanges where they won’t even ask for your name.
Big choice. This applies not only to the number of cryptocurrencies and trIs It Worth Investing in Cryptocurrency?ading platforms. In addition to the actual purchase and storage of coins on many exchanges, other tools for earning are available.
And yet, with all the huge opportunities of the digital market, it would be naive to believe that an investment of 10 dollars in a matter of days or weeks will turn into a million. Big money does not appear out of nowhere, you still need time to study the market, accumulate and manage money, develop a strategy and choose how to invest. But it’s really worth it.
Disadvantages of Investing in Cryptocurrency
There are shortcomings everywhere, and the cryptocurrency market is no exception. Let’s name the main ones.
High volatility. The prices of digital assets are very volatile. A change in price by tens of percent in a matter of days or hours is quite a common occurrence. Therefore, investing in cryptocurrency money that you may need soon is not the best idea. If at this moment the market goes against you, you will have to exit it at a loss. This applies more to long-term investing and mining. Experienced traders can make good money on volatile assets and in a falling market.
Active influx of new users. Why is this circumstance more of a disadvantage than an advantage? The increase in the number of players in the market contributes to its stabilization. The market will become more calm and predictable, and there will be fewer opportunities to make huge profits. Now there is still a chance to jump into the last car of the outgoing train of early investors.
Uncertain legal status. In some countries, the use of cryptocurrencies is prohibited. In addition, it is still unclear how exactly to classify digital assets: consider them a commodity, money or securities.
Cryptocurrency Investment Risks
Cryptocurrency investments cannot be considered completely safe. If you decide to buy crypto, you need to be prepared for the inevitable risk.
Systemic market decline. Actually, this applies to any investment assets. Markets cannot constantly and endlessly grow, and there can be no guarantees that your asset will definitely rise in price. There are tendencies and ratios of probabilities.
Risks of prohibition of digital currencies. Globally, cryptocurrencies are unlikely to disappear, but a ban on using them in one way or another in individual countries is quite possible.
Threats of hacker attacks. If you have cryptocurrency, you need to store it properly. For storing large amounts, experienced investors recommend using hardware wallets. If you are not yet ready to spend some money to purchase such a device, at least do not store all your coins on the exchange.