on the crypto
Cryptocurrency is a relatively new type of investment and is an intriguing option for many people.
During the cryptocurrency boom earlier this year, many types of cryptocurrencies saw their prices skyrocket. The price of Bitcoin (quotation BTC), for example, rose more than 100% between the start of the year and mid-April. Ethereum rose nearly 250% in that time frame, and Dogecoin's price went up by over 3.000%.
While prices have fallen since they hit their peaks, these incredible returns have made cryptocurrencies impossible to ignore. If you're undecided about investing, there are two reasons you might want to consider buying now and two reasons you shouldn't.
Why consider investing in cryptocurrency?
1. It could potentially go mainstream someday
Cryptocurrency has the potential to change your life. It could become a traditional form of payment someday, it could provide a way to hedge against inflation, and blockchain technology - the foundation behind cryptocurrency - could also have a huge impact on how we operate.
If the cryptocurrency goes mainstream, its price could rise to new heights. Bitcoin is currently priced close to $ 44.000 per token, but some experts predict that it could one day reach as high as $ 500.000 per token. Depending on how widely adopted cryptocurrency is, there could be great earning potential for early investors.
Of course, no one knows for sure if it will really go mainstream. But if you are an early adopter and believe that cryptocurrency has the potential to change society as we know it, now may be the time to buy.
2. You prefer to risk losing money rather than living with "what if"
Even if you're skeptical of cryptocurrency, there's another reason to consider investing: you don't want to live with the regret of not buying if it goes mainstream.
If you are undecided whether to invest, imagine two different scenarios. First, think about how you would feel if you bought cryptocurrency now, but it ultimately failed and you lost every dollar you invested. Secondly, consider how you would feel if you decided not to invest, but it became a huge success and you lost those gains.
For some people, losing money is the worst case scenario. Okay, and it means cryptocurrencies are probably not the right investment for you. But if you'd rather risk losing money so you don't have to live with the "what if" down the road, you might consider investing.
Why cryptocurrency might not be right for you
1. It is a highly speculative investment
One of the biggest risks of buying cryptocurrencies is that nobody knows what the future holds. Unlike stocks, cryptocurrency doesn't have a long track record. Bitcoin was launched a little over ten years ago and many other currencies are only a few years old. There isn't much time to determine if these investments will continue to grow over the long term.
Even experts are divided on its potential. Tesla CEO Elon Musk, for example, has been a vocal supporter of both Bitcoin and Dogecoin, while Warren Buffett has famously expressed his contempt for cryptocurrencies.
There is a chance it may one day become widely adopted, but it could just as easily fail. If you are a risk averse investor, those odds aren't ideal.
2. It is extremely volatile
While cryptocurrency is successful in the long run, it is still an incredibly volatile investment. This year alone, Bitcoin has already experienced a roller coaster of ups and downs.
Although its price has started to recover from its most recent crash, Bitcoin is no stranger to volatility. The cryptocurrency has lost around 80% of its value in the past, and not all investors have the stomach for such turbulence.
Whether or not you should invest in cryptocurrency depends on your personal preferences and risk tolerance. If you are willing to take more risks in exchange for more potential gains, cryptocurrency may be the right investment for you. But if you'd rather avoid risk and volatility, there are plenty of other options out there.
