Personal Finance

The Pros and Cons of Investing in Cryptocurrency

investing in crytocurrency

Cryptocurrency has gained a lot of legitimacy over the years and a larger number of traditional investors are thinking about investing in it. Crypto is a particularly good investment for newcomers who might be coming from a tech angle. While traditional financial instruments might seem intimidating to them, they are often intrigued by the idea of digital currencies and want to participate in it. However, just like any asset, cryptocurrencies do have their drawbacks, and you need to be aware of those before you start. Here are some of the pros and cons of investing in cryptocurrency. 

Great Upside

One of the things that make cryptocurrencies so attractive is their growth potential. No one knows where bitcoin is going to go, but we can’t think of too many assets that have seen that much growth in so little time.

Bitcoin just went from $5,000 in the middle of spring to over $10,000 at the time of writing, so it still has traction behind it. While there’s a slight possibility that it’s at its peak right now, the reality is that technology will continue taking a bigger role in the financial world – and the world in general – and crypto fits perfectly into this new world, so there’s no reason to think it will just go away.

Volatility

What makes crypto great is also what makes many people afraid of it as well. While cryptocurrencies have great growth potential, they are also subject to huge swings which may not be what you’re looking for at the moment. A lot of people like to tout bitcoin as a store of value, but it might not be stable enough for ordinary investors. This much movement can be difficult to handle for someone looking for steady returns.

It’s Very Liquid

On the other hand, crypto is a market with very high liquidity. This means that it’s easy to buy and sell assets with minimum slippage. So, if you want to buy or sell Bitcoin at 3 in the morning, you can, unlike the stock market when you have to deal with trade hours. There’s even a bitcoin futures market for more sophisticated investors.

It Can Get Complex

Investing in cryptocurrencies can get complicated and you have to be ready for that at the start. For one, know that you will need to get a top bitcoin wallet before you can buy bitcoin or other cryptocurrencies. One example of a great wallet is Paxful. It is considered the top bitcoin wallet by many and allows you to store transactions across all devices. It also allows you to interact with their exchange seamlessly and is one of the most secure digital wallets that you can find.

Next, you will need to get familiar with different exchanges. Some like Coinbase will allow you to trade fiat for crypto, while others won’t. So, you have to do your research and find a reputable exchange you feel comfortable with.

These are just some of the pros and cons of investing in cryptocurrency. There is a world of options out there, and crypto is always evolving. If you’re interested in getting in on the action, we suggest you speak with an unbiased point of view and see how it compares to other instruments in your portfolio.

 

This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.