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Should You Invest in Cryptocurrency Markets?

Cryptocurrency can be a good investment to build wealth. However, you have to accept that it is a risky gamble as there is a big chance that you may lose all your money. So, the question here is whether you should invest in cryptocurrency markets. The answer is: it depends.

What are the risks of investing in cryptocurrency?

If you are seriously considering going into the process of trading in cryptocurrencies, you should first know the potential risks.

Although it is very profitable, investing in cryptocurrency has many risks including:

  • The large fluctuation in the prices of cryptocurrencies, up and down, can cause severe and rapid losses.
  • The emergence of fraudulent cryptocurrencies can deceive investors.
  • False promises of big profits are many.
  • There are many possible deceptive promises of some mining companies of high profits to investors,
  • Some investors get excited by profits and start ignoring the potential risks.
  • Digital exchanges are exposed to major hacking operations that have led to huge losses for investors in the past. 
  • Despite the tremendous technological progress, this was not able to provide adequate protection for these investments.
  • Investors sometimes have to use  the “cold storage” method away from the use of the Internet
  • Storing your coins in devices or paper wallets may be dangerous.
  • There is a risk of losing your private key or password. 

Cryptocurrency adoption

Despite the previous caveats, cryptocurrencies are still proving their pillars firmly and enthusiastically.

Advanced technology helps investors access institutional custody services especially since they have the tools they need to manage and protect crypto assets.

Cryptocurrency futures markets are created as financial giants like Square (NYSE: SQ) and PayPal (NASDAQ: PYPL) facilitate the buying and selling of cryptocurrencies on their popular platforms.

Other companies, such as Square, have also invested hundreds of millions of dollars in Bitcoin and other digital assets.

Additionally, Tesla (NASDAQ: TSLA) also bought $1.5 billion worth of Bitcoin in early 2021.

All previously profitable phenomena encourage big investors to join the cryptocurrency market

What are the average returns for cryptocurrencies?

There is no 100% guarantee of long-term cryptocurrency values.

Actually, many cryptocurrencies were launched a few years ago and their price is going higher day by day like Bitcoin, Litecoin, Link Chain, XRP, Dogecoin, CHZ, etc…

In 2013, one Bitcoin was worth just under $112, with a total market capitalization of just over $1.2 billion. Now, in 2021, one Bitcoin is worth about $53,000 and has a total market capitalization of $1 trillion. Furthermore, it will keep increasing more by the new year.

Eight years ago, one Litecoin was worth $3.38. Today it is worth about $245 per coin.

On the other hand, Devcoin, Novacoin, and CHNcoin are no longer listed by Coinmarketcap. So buying and holding smaller coins is not guaranteed as a long-term investment, and no rules are saying that investors will necessarily earn real money after a certain period.

Is cryptocurrency a good way to make money?

The question is still open. Is there a real point in investing in digital currencies?

There are real facts about the extreme wealth especially that some Bitcoin speculators achieved huge profits in a short period. Specifically, between 2016 and 2021, the price of one Bitcoin rose from 310 pounds to reach 61,000 pounds in 2021. Sounds great? Right.

The emergence of global cryptocurrency exchanges and their actual inclusion on the major exchanges is a fact. Additionally, Coinbase in San Francisco debuted last April on the US Nasdaq with a value of more than $100 billion (£70 billion), making its market capitalization more than double that of Barclays Bank.

All this is accompanied by the beginning of the emergence of new cryptocurrencies that use blockchain technology continuously.

Moreover, it has become possible to exchange government currencies, such as the dollar and the pound, buying digital currencies as well as using digital currencies in many buying, selling, and exchange applications

Should you invest in cryptocurrency?

Without any doubt, owning some cryptocurrency diversifies your portfolio…I mean your wallet.

If you believe that the use of cryptocurrency will become increasingly widespread over time, it is a good idea for you to purchase some cryptocurrencies directly as part of your investment plan. 

However, you have to get sufficient information that supports the success and continuity of a coin before investing.

If buying a certain cryptocurrency seems too risky for you, you can consider other ways to make a profit like buying shares of crypto companies like Coinbase, Square, and PayPal. You can also invest in an exchange like CME Group (NASDAQ: CME), which facilitates trading cryptocurrency futures.

Whereas, investments in these companies may not be as profitable as direct profit from free cryptocurrency trading.

Away from investing, you can also try Android Crypto Mining: How to Mine Crypto on Phone (2021)

The Future of Cryptocurrency

2021 has been an excellent year for cryptocurrency as well as for changing many negative perceptions among people.

Additionally, some governments who went through difficult economic conditions saw digital currencies as liberation from many traditional banking restrictions. As a result, dealing with them has become semi-official in many countries, including China, for example.

At the same time, some countries still criminalize and warn against dealing with them, such as Britain.

Which crypto to buy in 2021/2022?

Before choosing a coin to invest in, there are some warnings to be considered like:

  • Investors wishing to invest in cryptocurrency must realize the difficulty of achieving the fortunes that early investors have achieved.
  • The demand and support of a coin determine when to buy and when to sell.
  • Serious investors in cryptocurrency usually check the project of the coin and choose those with well-known projects to invest in.
  • You can follow what seasoned investors are buying.
  • University endowment or pension funds, which manage billions of pounds in cash and specialize in long-term investments, often invest only in Bitcoin.
  • Bitcoin is the original cryptocurrency and requires high long-term value
  • ًUse platforms which don’t have technical problems every here and then.

Is cryptocurrency a good long-term investment?

Yes, according to sophisticated investors such as banks, trust funds, and pension funds, this type of investment is highly feasible.

Many of them are investing more in digital currencies than ever before, and investment banking giant JP Morgan Chase said in February 2021 that he was advising investors to consider putting 1% of their investment into Bitcoin as a way to diversify their budgets.

In a multi-asset portfolio, JP Morgan Chase analysts told Amy that investors add up to 1% of their allocation to cryptocurrencies, as this would generate efficiency gains in the total risk-adjusted portfolio returns.

However, this investment advice is for financial professionals not the average investor with a few thousand pounds of stock.

Is Bitcoin a good inflation hedge?

Investment professionals often talk about cryptocurrency as a way for investors to protect against inflation.

There is one point that is important to make clear about the use of cryptocurrency as a protection against inflation. Only a certain coin, which is Bitcoin, can be seen as a protection against inflation, while most other currencies are still in a state of fluctuation and uncertainty.

When inflation rises, the value of cash in our savings account decreases over time. Thus, what will happen as the years go by is that we will buy fewer goods and services with the money in our bank accounts.

Investment options that are described as “protective”, such as government bonds or gold, tend to either hold their value more than cash in the longer term, or they tend not to be affected by any outside declines.

This is why a lot of long-term investment opportunities focus on moving cash from our bank accounts into stocks or assets like cryptocurrency, which can rise over time.

Accessing the Bitcoin token is safe as there is a promise that no more than 21 million units of Bitcoin will ever be created. Thus, it will not be an inflationary currency like the pound sterling or the dollar, on the contrary, some experts assert that Bitcoin is a deflationary currency, and its value increases over time.

Of course, the deflationary adjective in favor of Bitcoin declines if governments decide to outlaw owning it. India, for example, banned cryptocurrency trading, suggesting that it could impose fines on anyone caught holding crypto assets of any kind.

Lack of confidence in the legalization of Bitcoin and cryptocurrencies, in general, is one of the main reasons why many investors avoid trading in them.

Pieces of advice for investors

  • Invest only the money that you won’t need in the next 5 years.
  • Test the currency, its feasibility, and its future by investing in small amounts.
  • You have to be vigilant and work on trusted trading platforms only.
  • Try to limit your dealings with the platforms that have gained the confidence of traders.
  • Keep your traditional investments and grow them constantly.
  • Cryptocurrency investors should research the project and the team of the coin before investing.
  • Think long and hard about a successful cryptocurrency that has the real potential to make a real difference in the world.
  • Try not to be swayed by the hype people with this or that “rocket rise” coin.

Executive Summary

In any case, investing in digital currencies will remain speculative as this type of investment is not based on a reliable history or previous experiences.

Things are still very mysterious and unpredictable, and you may wake up one day to find that your government prevented dealing with it. However, big profits come with big risks.

Follow our main tip here and invest in cryptocurrency. You can invest the money which you don’t need only. Who knows? You may be the next millionaire.

Written by Abdallah Taleb

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