Is cryptocurrency a good investment?
A range of factors are considered when beginners invest in crypto.
Following is a summary of key points that every beginner should know:
- Cryptocurrencies are still an upcoming trend in comparison to older assets like stocks. The original cryptocurrency, “Bitcoin,” was introduced in 2009, although currently many new digital assets are being launched.
- They are growing at a rapid pace and overtaking traditional trading markets. Their returns cannot be rivalled by traditional stocks.
- Awareness related to the risks, fraud, and other market factors must be kept in mind before taking any decision. Investors are advised to research every factor.
- You shouldn’t fully indulge yourself in cryptocurrency; rather, make small but regular investments and keep savings as a backup during any future losses.
- Investors can buy crypto presale for high returns, but with a high risk factor. It means they can purchase cryptocurrencies before they are launched on the market. MEMAG and FIGHT OUT are two such examples.
Why is cryptocurrency a good investment in 2023?
We aim to answer if you should invest in cryptocurrency or not, and there are many good factors that will be explained in the following:
- An Emerging Investment Product
The value of crypto has peaked in recent years. Digital coins like Bitcoin carried a market capitalization of over $1 trillion at the end of 2021 after reaching the highest value of $69,000.
However, it is believed that bitcoin is undervalued. It is compared with the internet in the 1990s, when the internet was questioned about its uses, but now it has become a necessity, and it is considered that the same will be true in the case of digital coins.
- Huge discounts on offer during the bear market.
The cryptocurrency market peaked in 2021.Those considering investing in this market now have the opportunity to take full advantage of the market, as all digital assets are down.
- For example, the price of Bitcoin peaked at $69,000 in 2021 but reached its downfall in 2023 at $16,000.
- A decline of 75% between 2 years
- Although such declines are a great loss, they are usually recovered.
- As of right now, there is a 75% discount on offer for new investors in Bitcoin.
And such offers are not only in Bitcoin but also in some of the best altcoins on the market, which are also trading at such discounts.
- Diversification is seamless.
It is an endless process to create a diversified portfolio of cryptocurrencies.
Firstly, around 22,000 digital assets are listed on CoinMarketCap. It is impossible to assess each and every cryptocurrency to choose the best, but at the very least, it helps investors with different objectives narrow down their investments.
Next, traditional assets are considered one unit, unlike cryptocurrencies, which can be fractionated into small units. The reason for this is that because it is digital money, small fractions can be purchased by the investors.
Moreover, cryptocurrencies are a highly liquid asset and are available for trading 24/7. This makes it easy for the investors to purchase or sell a particular cryptocurrency.
- Past Performance
Every investor wants to earn profits that cannot be compared to traditional markets.
One should remember that past performances never influence the future price of a crypto currency. However, by analysing past facts, we can see how profitable cryptocurrencies have been in the last few years.
- To show some example, Ethereum, the world’s second-largest cryptocurrency, was at $0.30 in 2015.
- Later in 2021, the price was around $4,900, which shows an increase of over 1.4 million percent from 2015.
When the next bull market arrives, similar changes can be seen in the valuation of cryptocurrencies.
Risks and Things to Consider
Understanding the risks involved in crypto investment is a crucial step. We shall discuss some of the risks that must be taken into account.
- Crypto currency volatility is much higher than that of other assets such as stocks or index funds.
- For example, the estimated value of the entire cryptocurrency market was over $1.05 trillion in November 2022. However, a week later, the market capitalization fell by 17%, bringing the total to $817 billion.
- In 2023, it will again surpass $1 trillion in total market capitalization.
As shown, such high levels of volatility are not suitable for average investors.
Another risk is relevant to storage. Usually, digital assets are stored in software wallets. However, there is a chance that the owner will forget their password or, worse, will witness an external hack, in which case the crypto currency will be lost. Cryptocurrencies are decentralized, and their loss cannot be reversed.
The most dangerous factor is that the investors can lose most or all of their capital in cryptocurrencies, which can be the downfall of their career or even their daily lives.
Eventually, risks can be put under control by various methods like diversification, personal research, and understanding regulations and wallet security.
Our Final Verdict
We have concluded that cryptocurrency is a high-yield investment with high risk factors. It is volatile and speculative—a well-rounded investment plan that requires thorough research.
To learn about other investment types, please take a look at the Investment Types page.
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FAQs
Is it reasonable to invest in cryptocurrency
Crypto-currency is known as a great investment with high returns. However, there is also a downside. Factors such as risk tolerance, liquidity, and their time horizon should be analyzed.
How do I get started with cryptocurrency investing?
You should first decide which crypto-currency you want to invest in. Consider the best storage and wallet options that would be most convenient for you. Decide the amount you can afford to invest in crypto and manage all the investments.
How can I buy cryptocurrency?
A crypto exchange that is safe and regulated must be selected. Both buyers and sellers will be present at the exchange platform. A payment method needs to be chosen before an order can be placed.