According to a recent study, about 3% of the world’s population owns cryptocurrency. But what exactly is a cryptocurrency, and is it safe to invest your savings in one?
It is a digital or virtual currency that uses cryptography for security. It is decentralized, not subject to government or financial institution control.
There are two main schools of thought regarding Bitcoin and other cryptocurrencies. Some people believe that cryptocurrencies are the future of money and that investing all of your savings into them is a smart move. Others believe cryptocurrencies are a speculative bubble bound to burst sooner or later, and pouring all your savings into them is risky. So, which side is right? Is it safe to invest all of your savings into cryptocurrency? Read on to find out.
1. Cryptocurrencies are still a new and volatile asset class.
Although cryptocurrencies have been around for about ten years, they are still a relatively new asset class. They are also very volatile, which means their prices can rise and fall sharply over a short period.
For example, the price of Bitcoin fell by over 50% in 2018. However, many people buy cryptocurrency hoping its price will continue to rise, so they are willing to take on this risk. And indeed, the cost of Bitcoin has rebounded in 2019 and is currently up by over 150% from its 2018 low.
2. Cryptocurrencies are not regulated.
Another thing to remember is that governments or financial institutions do not regulate cryptocurrencies. If you invest all of your savings into cryptocurrency and something goes wrong, you will not have any legal protections.
For example, suppose a cryptocurrency exchange is hacked, and your money is stolen. In that case, you will not be able to get your money back. And if a cryptocurrency company goes bankrupt, you may not get your money back either.
3. Cryptocurrencies can be a paradise for illegal activities.
Because cryptocurrencies are not regulated, causing many illegal activities. For example, Bitcoin has been used to buy illicit drugs on the Silk Road marketplace. And because cryptocurrencies can be anonymous, it is easy for money launderers. You also need to be aware of the potential for fraud. For example, there have been cases of people setting up fake cryptocurrency exchanges and stealing people’s money.
4. You could lose all of your money if you don’t know what you’re doing.
Investing in cryptocurrency is not for the faint of heart. You could easily lose all of your money if you don’t know what you’re doing. It is because the cryptocurrency market is full of scams and hackers. So, if you’re going to invest in cryptocurrency, you need to be very careful and do your research. And even then, you could still lose money. Many people are still willing to invest in cryptocurrency because of the potential for huge returns.
5. You need to be ready for the possibility of a total loss.
Investing in cryptocurrency is risky, and you need to be ready for the possibility of losing all of your money. If you’re not comfortable with this risk, you should not invest in cryptocurrency. Are you prepared to lose all of your savings? There is no right or wrong answer to this question. It depends on your risk tolerance. And some people are willing to risk everything because they believe in the long-term potential of cryptocurrencies.
6. Cryptocurrencies are a speculative bubble.
There is a lot of debate about whether or not cryptocurrencies are a speculative bubble. A speculative bubble is when the price of an asset rises because people are buying it in the hope of selling it at an even higher price. And when the bubble finally bursts, the asset price falls sharply.
Some people think cryptocurrencies are a speculative bubble because their prices have risen quickly in recent years. And indeed, the cost of Bitcoin has increased over the years. However, it would be best if you kept in mind that the price of Bitcoin is still quite volatile, and it could fall sharply at any time.
7. Cryptocurrencies are a risky investment.
Cryptocurrencies are a risky investment. It is because their prices are volatile, and they are not regulated. So, suppose you’re thinking about investing in cryptocurrency.
However, some people are still willing to invest in cryptocurrency because of the potential for huge returns. And indeed, the price of Bitcoin has rebounded in 2019 and is currently up by over 150% from its 2018 low. Interestingly, the top cryptocurrencies by market capitalization increased in 2019. During COVID-19, we have seen a similar trend with many people investing in cryptocurrency as a hedge against the stock market.
8. You should not invest more than you can afford to lose.
When investing in cryptocurrency, you should never invest more than you can afford to lose. It is because the cryptocurrency market is very volatile, and the price of Bitcoin could fall sharply at any time.
So, if you’re thinking about investing in cryptocurrency, only invest what you can afford to lose.
9. Cryptocurrencies are a long-term investment.
Cryptocurrencies are a long-term investment. It is because they are not regulated, and their prices are volatile.
However, some people are still willing to invest in cryptocurrency because of the potential for huge returns. Many people are still willing to invest in cryptocurrency because of the potential for huge returns.
10. You should consult a financial advisor before investing in cryptocurrency.
If you’re thinking about investing in cryptocurrency, you should consult a financial advisor.
A financial advisor can help you understand the risks involved in investing in cryptocurrency and help you decide whether or not it’s right for you.
Bottom Line:
Cryptocurrencies are a risky investment. You could lose all of your money if you invest in them. However, some people are still willing to invest in cryptocurrency because of the potential for huge returns. If you’re thinking about investing in cryptocurrency, you should consult a financial advisor.
