It’s possible to get filthy rich by investing in cryptocurrency in 2021. But you could also lose all of your money. How can both be true? Investing in crypto assets is risky but also potentially extremely profitable. The cryptocurrency market has been witnessing a bear run over the past month. Bitcoin plunged by nearly 50% from its all-time high of ₹46 lakhs in three months. The dip has left investors split into two – some rushing to sell off to save losses and others who faithfully hold their stake with hope for the future. Despite the huge fall in Bitcoin and other leading cryptocurrencies, things are not bad in the cryptocurrency market.
The blockchain technology underlying bitcoin and other cryptocurrencies has been hailed as a potential gamechanger for a large number of industries, from shipping and supply chains to banking and healthcare. By removing intermediaries and trusted actors from computer networks, distributed ledgers can facilitate new types of economic activity that were not possible before. This potential makes for an attractive investment to people who believe in the future of digital currencies. For people who believe in that promise, investing in cryptocurrency represents a way to earn high returns while supporting the future of technology.
Why one should don’t hesitate to invest in Crypto Currency?
Another common reason to invest in cryptocurrency is the desire for a reliable, long-term store of value. Unlike fiat money, most cryptocurrencies have a limited supply, capped by mathematical algorithms. This makes it impossible for any political body or government agency to dilute their value through inflation. Moreover, due to the cryptographic nature of cryptocurrencies, it is impossible for a government body to tax or confiscate tokens without the cooperation of the owner. This property makes cryptocurrency attractive to people who are worried about hyperinflationary events, bank failures, or other disaster scenarios. Bitcoin in particular has attracted attention due to its deflationary and censorship-resistant properties, leading proponents to describe it as “digital gold.”
While many supporters believe that digital currencies could become part of daily life, the cryptocurrency market is currently dominated by speculative trading. Studies of blockchain activity show that exchange trades remain the most prevalent use for cryptocurrencies—and account for far more economic activity than ordinary trades and purchases. Cryptocurrency skeptics, including Warren Buffett, Bill Gates, and JPMorgan CEO Jamie Dimon have all warned of a potential crypto bubble. Cryptocurrencies are not unique in being subject to speculative manias and irrational exuberance. Other assets such as cannabis stocks, technology stocks, precious metals, and even houses have also been a subject of bubbles.
While it’s clear there are many reasons to be skeptical of digital currencies, many traditional investors have been won over to the new asset class. The blockchain space is frequently described as a transformative industry, with the potential to disrupt the world in the same way that the Internet did in the 1990s. However, supporters of digital currencies should be careful to understand the risks of cryptocurrency before they start investing. In addition to mastering the complex security protocols and thoroughly researching their new investments, they should also take the time to understand the most common pitfalls that befall novice investors.