Is it safe to invest in cryptocurrencies?

 

The crypto boom is undoubtedly real. Investors in retail and institutional segments are rushing to cash in on the popularity of these digital assets. And while the crypto market may be the hotspot for many risk-taking investors and traders, there may be a few people who remain wary of this new asset on the block. 

 

If you count yourself among these conservative investors and traders, we get it. You, like many others, may be wondering: ‘Is it safe to invest in cryptocurrencies?’ And this is no doubt a valid concern, given that we don’t really know much about crypto yet, and that there is no single governing authority overseeing the way the crypto market functions. 

 

Nevertheless, there are some properties that make cryptocurrencies quite safe and tamper-proof. But before we get into that, let’s answer the million dollar question on everybody’s mind.

Is it safe to invest in cryptocurrencies?

While you may be looking for a clear answer to this question, there is, unfortunately, no straightforward way to answer it. Is crypto a safe investment? Well, that depends on what cryptocurrency or currencies you invest in. Just like it is in the case of direct equity, where some stocks carry a much higher risk than others, so too, some cryptocurrencies are way more risky than other cryptocurrencies.

 

For instance, Bitcoin and Ethereum, which are cryptocurrencies that have been around for years now – may be among the less risky crypto assets. This is because the blockchain technology used to create and circulate these currencies add value in different ways. 

 

On the other hand, an example of a more risky cryptocurrency would be Squid, which was created in response to the massive popularity of the Netflix show – The Squid Game. Investors rushed to buy this new coin, of which they practically knew nothing. The price of the coin skyrocketed from around $628 to over $2,800 in a matter of ten minutes.

 

And then in a shocking turn of events, the price dropped from $2,800 to zero just five minutes later. So, the takeaway is this – some cryptocurrencies are riskier than others. This is why it is always essential to perform the necessary research and carry out the due analyses needed to understand if a particular currency is worth investing in. 

 

To further understand whether it is safe to invest in crypto, let’s take a quick look at some of the risks and benefits associated with this digital asset.

Risks of investing in cryptocurrencies

Here are the top three risks associated with investing in cryptocurrencies.

 

 

• Lack of regulations

Cryptocurrencies continue to remain unregulated, and they are not backed by any financial institution or any government. So, there is no entity to take care of investor interests.

 

 

• Volatility in prices

The prices of cryptocurrencies are also very volatile, and this is true even for established coins like Bitcoin and Ethereum. 

 

 

• Difficult to understand

For most traders and investors, understanding how blockchain technology and cryptocurrencies function can be quite challenging.

 

Benefits of investing in cryptocurrencies

Despite the risks, there are also some benefits involved in investing in cryptocurrencies, if you know what you’re doing. Here are the upsides. 

 

 

• Long-term investment opportunities

Cryptocurrencies offer long-term investment opportunities for investors keen on reaping rewards in the long run.

 

 

• Access to international assets

Cryptocurrencies are – as of now – not restricted by borders. So, it is possible to invest in a wide range of these digital assets without worrying about geographical restrictions.

 

 

• Flexible market timings

The crypto market is active 24×7, so you can trade your coins at any time of the day or night. This kind of flexibility is a big bonus.

Summing up

So, this should give you an answer to the question – ‘Is cryptocurrency a safe investment?’ The answer is that like all high-risk assets, crypto comes with its own uncertainties. This is why some experts recommend that if you absolutely want to invest in crypto assets, you could invest some disposable money and remain invested over the long run. 

 

 

A quick recap

 

• Is crypto a safe investment? Well, that depends on what cryptocurrency or currencies you invest in.
• Some cryptocurrencies are way more risky than other cryptocurrencies.
• The top risks associated with investing in cryptocurrency are the lack of regulations, the price volatility and the complexity.
• But on the upside, cryptocurrencies may offer good options for long-term investment opportunities, and are not restricted by borders or market timings.