More people are showing an interest in investing in cryptocurrency. As the opportunities to do so expand, the question of should I invest in cryptocurrency has become much more common. But is investing in cryptocurrency a good idea or a bad idea? For most people, digital currency investment will be a good idea, provided you do your research and develop strategies or let professionals do so for you.
The Good and Bad of Investing in Cryptocurrency: Pros and Cons
As you look for reasons why to invest in cryptocurrency, you will find both positives and negatives. Consider both sides, as crypto investing provides numerous opportunities, but it also comes with risk.
Pro: Potential High Returns
One of the most significant advantages of digital currency investment is the potential for incredible profits. The potential for profits is particularly great if you invest in an up-and-coming cryptocurrency when it is still in the early stages. You do not need to look any further than Bitcoin to see the degree of exponential returns you can have. Of course, that type of growth is rare and takes time, but there are still plenty of other cryptocurrencies that have experienced substantial growth.
Pro: Volatility Can Lead to Large Profits
Investing early in a promising cryptocurrency is not the only way to make a dramatic profit. Because the market is so volatile, they are near-constant opportunities to buy low and sell high, leading to significant gains.
Con: Volatility Can Increase Risk
Remember that volatility is a double-edged sword. While it can lead to excellent profits, it also increases your risk. With cryptocurrency prices fluctuating so much, it is easy to lose everything if a coin drops or a bubble bursts. This is why most crypto investors suggest beginners only invest what they can afford to lose.
Pro: Reduced Time Horizon
Another consideration when asking yourself why invest in cryptocurrency is the shorter time horizon of crypto investments compared to other types of investments. Essentially, when you invest in an ICO or established cryptocurrency, you are likely to be able to cash out your investment fairly quickly. Some of this comes down to the previously mentioned volatility, but the crypto market growth is also a factor.
Pro: High Liquidity
Compared to other types of investments, cryptocurrency tends to have higher liquidity. This is particularly true when you compare ICOs to IPOs, although it will vary by currency. The liquidity means that you can easily and quickly transfer cryptocurrency, at least to a greater extent than other investments.
Pro: 24/7 Trading
Another reason many people wonder should I invest in cryptocurrency is the fact that you can trade it 24/7. This comes from the fact that there is no central authority regulating cryptocurrency, unlike stocks or other instruments.
One of the biggest appeals of investing in cryptocurrency is the anonymity that comes with it. The blockchain is anonymous, and no one can tell who owns how much cryptocurrency. Many of the trading and investing opportunities for crypto are also anonymous or require minimal identity confirmation.
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You can also choose to give up some of the anonymity for increased security. Some investment platforms, for example, require KYC or AML information and, in exchange, have stronger protections on your funds.
Con: Irreversible Transactions
If you were to invest in cryptocurrency yourself, you need to understand that blockchain transactions are final. There is no way to return your funds if you send them to the wrong account. This is great from a security standpoint, but it means that if you make a mistake, you are out of luck. Overcoming this con is as simple as taking extra care during transactions.
Con: Potential Learning Curve
Another caveat that is easy enough to overcome but requires consideration is that learning how to invest in crypto currency comes with a learning curve. While some of the strategies overlap with other types of traditional trading, it is a new concept. If you plan to do the research yourself, you will need to learn to read charts, analyze information, and always stay up-to-date on the news.
Best Cryptocurrency to Invest in 2021
Once you have decided to invest in crypto, how do you know which is the best crypto investment for you? With hundreds of cryptocurrencies, some offer better investments than others. Trading Bitcoin, Ethereum, or another major cryptocurrency will give you higher liquidity, along with the benefits that go along with it, such as ease of trading.
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You will also want to consider market capitalization. Cryptocurrencies with a higher market capitalization, like Bitcoin, are already well-established, something which decreases your risk somewhat but also decreases your potential for profits. Those with low market capitalizations, such as newly-launched ones, are high-risk but have a high potential for profit. They could become the next big thing and bring large returns, or fail and lose your money.
To answer what cryptocurrency should I buy, consider the following factors, and remember that your best crypto investment may not be the same as someone else’s.
- Market capitalization
- Community involvement and opinions
- Risk level
- Who controls it
- Basic fundamental analysis
- The usefulness of the crypto
- Price history
- Overall reputation
How to Invest in Cryptocurrency
You have a few options when it comes to investing in cryptocurrency. The biggest decision will be whether you want to do it yourself or leave it to the pros.
If you choose to invest in cryptocurrency yourself, you will need to select an exchange to trade on. Choose one with a strong reputation and plenty of trading pairs and liquidity. Then you will have to pay attention to market movements, including both the news and technical analysis, to decide when to buy and sell a cryptocurrency.
To be successful with this type of investing, you need to have time to complete a lot of research and check the market regularly, ideally several times a day.
Invest Without Worrying About Completing Your Analysis
A better alternative for most people still learning how to invest in cryptocurrency is to find a service that will invest for you. These services let you customize your investments to a certain extent, including risk level and your chosen cryptocurrency.
With a service, you do not have to worry about research or making decisions, as experts take care of that for you. There are professionals whose job is to watch the market 24/7, letting you benefit from the investment without putting in the time. Of course, there are still no guaranteed profits.
The Best Cryptocurrency Investment Platform
Haru offers a great way to invest in cryptocurrency with minimal knowledge, as experts with experience and strong track record take care of analysis and the investment for you. Haru Invest also has low management fees, charging no fee unless you earn more than 15 percent APR.