Cryptocurrency like Bitcoin, Ethereum and Dogecoin have seen massive gains over the years.
While these assets are generally risky, crypto can be a good investment for those with appetite for it.
There are also some investors who would rather steer clear of it right now.
What is your risk appetite for investing? Would you assign a significant amount of your portfolio to investing in cryptocurrencies? Why? Why not?
“Cryptocurrency is a relatively new type of investment, and it is a curious option for many traders out there.”
During the crypto surge this year, many types of cryptocurrencies have seen prices shoot up. The price of Bitcoin, went up by more than 100% in the beginning of the year. Ethereum, went up by nearly 250% at almost the same time; and the price of Dogecoin skyrocketed by more than 3,000%.
While the prices have already fallen off since they peaked, like Bitcoin who gave up almost all of its gains this year in half the time it spent moving up. However, these moves have made headlines far and wide that created more following for cryptocurrencies. This has made crypto impossible to ignore. If you're still on the fence about investing in this digital asset, here are two reason you might consider buying now and two reasons why you shouldn't.
Why invest in cryptocurrency?
1. It could potentially become mainstream
Crypto whether we like it or not, has the potential to become a mainstream form of payment in the future. It could also provide a smart way to hedge against inflation. In the event that crypto does become mainstream, its price could soar even higher. Bitcoin is currently price at $50,000 at the time of this blog post, but some experts predict that it may reach up to $100,000 before the year ends, and quite a few believe it can go as high as $500,000 per token someday. This of course would depend on how widely this digital asset would be adopted. There is a huge possibility of earning a lot for early investors.
Of course, nothing is for sure whether it would actually happen. But if you are the 'risk' type of investor then this just might be the right type of investment for you.
2. You can't live with yourself if you lost the opportunity
“I'd rather risk losing money than live with "what ifs” ~ Cryptotrader
There a many skeptics in the trading world, and even more with crypto assets. There's will always be one reason to consider investing: You don't want to live with the regret that you didn't buy when you had the chance before it went mainstream.
If you haven't decided yet, try to picture this. First, think about how you'd feel if you bought Bitcoin right now, but then ended up failing and blew your account. Second, consider how'd you feel if you chose not to invest, but it became a massive success and you missed out on those earnings.
For many people, losing money is the worst-case scenario. They may think that this digital asset may not be the best investment for them. But, some would rather lose the money so they don't have to live with the regret down the road.
Why cryptocurrency may not be right for you
1. It's highly speculative
One of the greatest risk of investing in cryptocurrency is that nobody knows what the future holds. Unlike stocks, forex or bonds, these crypto assets don't have a long track record. Bitcoin was only launched 10 years ago, and many others followed a few years after. To but it bluntly, that's really not much time to determine whether these investments will continue to grow over the long term.
Experts are divided about its potential. Some big names like Elon Musk is an avid supporter of Bitcoin and Dogecoin, while the world-famous investor Warren Buffett has popularly voiced his disdain for cryptocurrency. There is a chance it could become widely adopted in the future, but it could just as easily fail. If you're risk-averse, then the odds are not ideal for you.
2. It's extremely volatile
Even if crypto does succeed, it is and will remain to be a highly-volatile instrument. If you're an investor, you'd have to accept the roller-coaster ride experience you're in for with cryptocurrency. Bitcoin, which is known for its wild swings has lost almost all its gain this year. Some investors just don't have the stomach for that much volatility.
Whether or not you should invest in crypto is entirely up to you. Examine your personal risk preferences and your overall tolerance to each investment you're going to take. As the saying goes, the higher the risk, the higher the earning potential. This is so true for cryptocurrency. But if you'd rather avoid the risk and volatility, there is certainly many other options out there.
This article represents the opinion of the writer and does not constitute an investment advice. Always keep in mind that financial trading is risky and you should only invest money that you are willing to lose.