What Are The Risks And Rewards Of Investing In Cryptocurrency?

Every day it seems, we read or hear about the unprecedented growth in the value of a particular cryptocurrency, the creation of a cryptocurrency millionaire, or the rising popularity of cryptocurrency wallets.

Bitcoin, the first cryptocurrency, was created in 2009 and is arguably the most well-known name in the industry. In the market for cryptocurrencies today, there are nearly 3,000 different digital currencies, and for many, this novel investment strategy holds the key to their financial future.

Investing in cryptocurrency entails risks as well as potential rewards. Just like if you pay someone to do my assignment and you wait with your fingers crossed. Cryptocurrencies are volatile, which means their prices can fluctuate dramatically. As a result, they are a risky investment with high potential returns.

The word cryptocurrency is new to the financial world. Even though, compared to the previous year, the TechRepublic report states that job postings for blockchain and cryptocurrency businesses have increased by 118%. (Been et al., 2021). Be aware of the advantages and disadvantages of investing in cryptocurrencies. The blog writer of assignment help services has outlined the benefits and drawbacks of cryptocurrencies in this post so you can get all the information you require.

4 Benefits of Cryptocurrency

1. High risk with the possibility of a high reward

There are over 10,000 cryptos on the market today, each with its own unique set of characteristics. However, all cryptocurrencies share a few characteristics, such as their propensity for sudden price increases (and decreases). Coin supply from miners and buyer demand are the two main factors that influence prices. Additionally, the dynamics of supply and demand can lead to substantial profits. For instance,  Ethereum’s price nearly doubled between July 2021 and December 2021, providing investors who jumped on the bandwagon at the perfect time with a tidy profit.

2. The cryptocurrency’s underlying blockchain technology is inherently secure

Some of the most significant advantages of cryptocurrencies are not associated with the cryptocurrency themselves, but with the infrastructure that enables them. That is the blockchain, a decentralized ledger for data storage that keeps track of every transaction made there. There is no way to ever remove an entry from the blockchain. Furthermore, no hacker has access to the entire chain at once because the blockchain is distributed across numerous computers and stored decentrally, making all data stored therein unbreakable.

3. Cryptocurrencies may be able to help investors beat inflation

Due to the fact that cryptocurrencies aren’t linked to any particular economy or currency, their price is determined by global demand as opposed to, say, national inflation. But what about the inflation of cryptocurrencies? For the most part, as an investor, you can relax. Because the number of coins is limited, the amount available cannot spiral out of control, resulting in no inflation. This strategy prevents inflation regardless of whether a coin has an annual cap or an overall cap like Bitcoin or Ethereum does.

4. Cryptocurrency trading is available 24 hours a day, seven days a week

The fact that cryptocurrency markets are open 24/7 gives cryptocurrencies another edge over traditional financial institutions. You don’t need to wait for the NASDAQ, NYSE, or any other exchange to open for business each day in order to buy, sell, or transact in cryptocurrency because coins are mined and transactions are recorded constantly. This has had such an effect that regular stock markets are investigating the possibility of stock trading outside of standard banking hours even though this may be some time away. Therefore, for investors who are constantly on the move, cryptocurrency may be the best way to earn income outside of regular business hours.

4 drawbacks of cryptocurrency

1. It requires time and effort to understand cryptocurrencies

It can take some time to understand cryptocurrency. If you are not a digital native, understanding cryptocurrencies and the blockchain can be very foreign to you. And attempting to invest in something you don’t fully understand is a risk in and of itself. You can find a ton of information online to assist you, such as a series of the blog post on cryptocurrency, but you’ll still need to invest some time to fully comprehend the benefits and drawbacks of cryptocurrency investment.

2. Cryptocurrencies may be a very risky investment

Cryptocurrency prices have the potential to soar to unimaginable heights (with benefits for investors!) and plummet to terrifying lows in an instant. So, if you’re looking for consistent returns, this may not be the best bet. The cryptocurrency market is built on speculation, and its small size makes it more susceptible to price fluctuations. This, in turn, can have a negative impact on the value of coins, which is one of the major drawbacks of cryptocurrency.

3. Cryptocurrencies have yet to be proven as long-term investments

While cryptocurrencies have grown in popularity, it’s important to remember that they’ve only been around for a little more than a decade. The concept didn’t really take off until the 2008 release of a white paper on Bitcoin. Stock markets, on the other hand, can trace their roots back hundreds of years. One example is the 1801 founding of the London Stock Exchange. For millennia, gold has been known to be a reliable keeper of value. But what about cryptocurrencies? Nobody is really sure what will happen to cryptos in the future, so it takes courage to invest in these uncharted waters.

4. Security risks can affect cryptocurrency newcomers

Cryptocurrencies may not carry the risks associated with relying on centralized intermediaries, but that doesn’t mean they are completely secure. As a cryptocurrency owner, you risk losing the private key that allows you to access your coins—and thus all of your holdings. Then there are all the other deceptive methods of gaining control, like hacking and phishing. This is an issue that seasoned investors are aware of, but newer investors became more vulnerable to these types of traps.

Bottom line

In general, research is still ongoing into the advantages and disadvantages of cryptocurrency investment. However, there are a number of potential benefits to investing in cryptocurrencies, such as the chance of higher returns, the capacity to conduct transactions using them, and the chance of greater global adoption. There are also risks to investing in cryptocurrencies, such as price volatility and the possibility of fraud.

Reference list

Miller, J. BAW., (2022).  What Is Cryptocurrency? Everything You Need To Know! Online Available at <https://www.dissertationproposal.co.uk/guide/what-is-cryptocurrency-everything-you-need-to-know/> [Accessed on 29th July 2022]

Been, E. A., Staff, T. R., Wolber, A., Whitney, L., Pernet, C., Alexander, M., & Combs, V. (2021, October 13). Cryptocurrency and blockchain jobs listings skyrocket in 2021. TechRepublic. Retrieved May 21, 2022, from https://www.techrepublic.com/article/listings-for-cryptocurrency-and-blockchain-jobs-skyrocket-in-2021/