What is the potential of investing in Cryptocurrencies?
Cryptocurrency is digital currency managed through cryptography (advanced encryption technique). It is a decentralised currency, which allows functions like transaction processing, currency issuance, and verification across the internet.
Cryptocurrencies are free from government interference, which means that there is no regulatory control to support its value. However, cryptocurrency value relies on investors willingness to pay, at a certain point, but if the specific cryptocurrency you selected to invest in folds up then there will be no way to get your investment back.
Cryptocurrencies are digitally created. Mining process needs powerful computers, which help to solve complex crunch numbers and algorithms.
Financial traders get attracted to this new investment area because there is huge volatility and behaviour is different than flat currencies. Cryptocurrency is still in its infant stage, so there is supply scarcity, which causes high volatility. Investors can take advantage of this volatility, especially when other currencies are displaying flat movements. One thing to remember is high volatility means increased risks.
Varieties of cryptocurrencies are available for investment
Cryptocurrency space became famous and secure because of Bitcoin. However, if you are not familiar with this space and are ready to invest in cryptocurrency then Bitcoin is not the only one. There are Ripple, Ethereum, Litecoin and hundreds other to consider. To make good investment choose rationally and engage in cryptocurrency prices then combine fundamental and price analysis.
Investing in cryptocurrencies and commodities is same. Commodities are assets used in real world and can be invested via open market exchanges. Cryptocurrencies are used in insurance and financial applications. While choosing investors need to consider the usage and value created by a specific cryptocurrency.
Usage is key criterion for investors
Fundamental data analysis is the main aspect to detect a good investment opportunity. Therefore, investors need to concentrate on supply and demand statistics based on real-world usage because total coins circulated are small.
Bitcoin and Ethereum usage charts are available on the internet. It is a proof of cryptocurrency usage and trade volume. People prefer cryptocurrency because transactions made using them are easy and cheap. In addition, users don’t need to carry large amounts around, which can be risky. Technologically adept people prefer to carry million dollars of cryptocurrency on their memory card while travelling anywhere around the world. Therefore, numbers of merchants have started accepting cryptocurrencies.
Cryptocurrency has low inflation risk
Respective governments control their currency circulation. At times currency price fluctuate because more money gets printed. When the value of currency goes down it affects the purchasing power and you need to pay more. With cryptocurrency, the system is immeasurable, so there is no concern about it getting finished. In addition, it does not rely on government policy, which can fall short and cause complete collapse or hyperinflation.
Cryptocurrencies exchange process
Very soon you will be able to exchange cryptocurrencies for traditional money. Therefore, the risk to lock your funds presented some years ago will not be a concern in near future. Looking at this aspect with a different perspective – your portfolio including cryptocurrencies is a different way to store funds or exchange it for cash as soon as market conditions fluctuate.
Is investing in cryptocurrencies the right decision for you?
Keep in mind that just like any other investment the risk for cyrptocurrencies investment is same. As cryptocurrencies have no intrinsic value they are susceptible to high price swings that can escalate investment loss. For example, the drop can be double in a couple of hours like from $255 to $125. If you cannot afford this type of volatility then choose another suitable investment option.
Supporters suggest that its limited supply and usage growth are its value drivers. Alternatively, detractors say it is another exploratory bubble. This is a debate, which conservative investor needs to avoid.
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