Cryptocurrency has been in the spotlight over the past few years, with plenty of debate going around over its viability as an investment channel. Looking at the value of Bitcoin over the past decade, there is no doubt about the volatility of cryptocurrency.
Since mid-2016, its unit price has been yo-yoing up and down. In December 2017, Bitcoin was valued at $13,000, but by June the following year, its price had dropped to $6,100. Overall, Bitcoin is a great investment for those who bought in early and resisted the temptation to sell when the currency’s value dipped as it is now valued at $57,000.
As with any other investment, you need to carefully weigh the risks and potential gains before deciding to sow your precious savings into crypto. Here are some factors to consider when making your decision.
The overall growth of cryptocurrency, especially Bitcoin, cannot be gainsaid. When Bitcoin started trading at just $0.30 per unit, few would have expected that price to multiply thousands of times to what it is today.
Despite the volatility that is partly due to the fact that its value is not pegged on a commodity or regulated by any government agency, crypto is projected to continue growing. Researchers project that the global cryptocurrency market will grow by 30 percent between now and 2029.
Among the factors fueling this incredible growth is holding coins by speculating investors as they anticipate a spike in the currency’s unit price. Increased interest in and uptake of cryptocurrency has also led to the rise in price according to the market forces of demand and supply.
Steep Learning Curve
One of the factors that have discouraged many potential investors from taking the plunge into crypto is the steep learning curve it poses. Real estate or conventional stocks are fairly straightforward. You buy and wait for the price of the property to appreciate or look at the performance of a company to gauge the potential of its share value to rise.
Besides its price history, you should research the community following the cryptocurrency—the team behind the currency and the underlying technology—to know if a cryptocurrency is worth ploughing money into. Thankfully, there are cryptocurrency exchanges that not only facilitate buying and selling of different coins but also offer guidance to budding investors.
Reading reviews on Coinbase and other exchange forums can help you make a wiser investment decision.
The volatility of cryptocurrencies is well documented. If you follow Bitcoin’s price chart, you will see a clear demonstration of how unstable the value is of cryptocurrencies. At the beginning of 2018 and in the middle of 2019, Bitcoin’s value dipped sharply after experiencing encouraging rallies.
Ethereum (ETH), one of the more popular altcoins, has not fared much better. After climbing to an all-time high in January 2018, the ETH price tumbled sharply to close the year at a tenth of that January high.
Be that as it may, experts assure Bitcoin and altcoin investors that such crashes are highly unlikely going forward. This is due to a number of factors, including the increased use of virtual currency occasioned by the COVID-19 pandemic. However, even notwithstanding this global crisis, huge multinationals and institutional investors have started warming up to cryptocurrencies. The entry of such players as PayPal into the digital currency fray has contributed to the upward trend in prices.
Cryptocurrency is becoming more and more accessible. In addition to the rising number of exchanges, popular tech platforms are facilitating cryptocurrency transactions. You can now buy, sell, or hold crypto as a PayPal account holder based in the United States. And you can perform these transactions from the comfort of your mobile device.
Google Pay now allows you to link your account with your Coinbase Case, while Amazon recently unveiled Amazon Managed Blockchain, a platform that facilitates the creation of new blockchains.
Cryptocurrency allows you to transact without having to divulge your personal information. This is an attribute that can be used for both good and nefarious purposes. There was a time when the mere mention of cryptocurrency evoked images of black market dealings in products frowned upon by the authorities.
However, those seeking total anonymity should know that cryptocurrency transactions are not 100 percent anonymous. The blockchain captures the digital address of the seller and buyer’s wallets, which can be used to trace the actual parties involved in a transaction.
Both Sides of the Coin
It will be to your benefit to get a full grasp of how crypto works before opening your investment portfolio. Weigh the pros and the cons before making a commitment. Take full advantage of the resources available online to ensure you make an informed decision.