The New Age Of Investments
By now you can clearly see that cryptocurrencies are no fad. The first blockchain-based cryptocurrency was launched in 2009 by Satoshi Nakamoto was called Bitcoin. Since then, naysayers have been surprised at how the market has continued to grow. Now, there are thousands of cryptocurrencies available for investing and trading. In this article, we will take a look at some of the pros and cons of cryptocurrency investments.
Pros
There is no doubt many have done very well investing in cryptocurrencies. Early adopters who bought Bitcoin when the price was low are enjoying astonishing returns. Here are some of the pros of owning cryptocurrencies.
Anonymity-The blockchains in which cryptocurrencies run on is a decentralized system that allows its users to remain anonymous. Instead of a typical username or email, a randomly-generated bitcoin address is given that keeps transactions private.- Youth-The cryptocurrency market is still young meaning there is still a lot of room for growth. The global market cap has continually shown growth since its beginning.
- Easy to join in-With as little as $10, you can start your portfolio on some exchanges. Exchanges are also easy to find and make accounts with. Some exchanges like Coinbase and Gemini let users connect their bank accounts for easy purchases.
- Alternative to cash-More people purchase items with a debit or credit card than cash nowadays so our money system is basically digital already. As we slowly move away from paper and metal, cryptocurrencies and blockchain ledgers look like a good alternative for the future.
- Security-Blockchains which holds and verifies every transaction works on a combination of hashing and proof-of-work that makes the network nearly tamper-proof. Someone would have to redo the hashes and proof of work. They would also have to take over more than half of the peer-to-peer network which is made up of tens of thousands of computers worldwide.
- Low transaction fees-Transaction fees for buying, selling, and transferring cryptocurrencies are far less than with traditional banks. This is very appealing not only to users but to the banks who will save millions of dollars each year if and when they decide to switch over to cryptocurrencies.
Cons
While investing in cryptocurrencies seems like a good idea, there are some things you should consider before taking the plunge.
- Lack of historical data-Cryptocurrencies hasn’t been around for very long so there is very little data history to compare it with, unlike our stock market that has nearly 100 years of historical data.
- Volatility-Since the overall market is still relatively young, it is also very volatile. This may look appealing to seasoned traders, but it can be devastating to new investors who may get scared and sell out too soon.
- Fraud-This is an issue any time money is involved. Some new investors can be easily swayed into get rich quick schemes that end up taking everything they have invested. Do research and read multiple reviews before investing in trading clubs and mining pools.
- Taxes are difficult-Cryptocurrency taxation can be difficult to understand. In the past, loopholes have helped investors avoid taxation. Now, every crypto sale has to be reported as a capital gain or loss including when you use your digital assets to purchase goods or services. There is also no guarantee that you will receive a Form 1099 from some of the decentralized exchanges, so keeping track of transactions might in your hands.
There is no doubt cryptocurrencies are going to continue to thrive regardless of the push back from the traditional banking system. As momentum continues to push cryptocurrencies forward, banks and other financial institutions will either need to adjust to the times or get out of the way.