Investing is the most crucial activity which can secure your future both mentally and financially. Sometimes, you may find it difficult to trust any random company quite easily.
Before investing money in any segment, you must do a deep research and to understand what are its upsides or positive offerings and downsides or negatives you must know. Same holds true with cryptocurrency as well.
Several advantages of cryptocurrency can easily attract any investor. However, if you wish to invest in it, you must know the risks involved as well, so that you prepare yourself for them.
Pros of Cryptocurrency
No effect of inflation
With price inflation, currency value declines. In the case of cryptocurrency, there is a fixed amount that is circulated, For example, there are just 21 million Bitcoins released. Now when their demand increases, their value increases and when the demand is stable the value is maintained. This protects cryptocurrency from inflation.
- Decentralized currency
Most of us know that cryptocurrencies are decentralized. No regulatory body or organization controls or manages it. Whoever owns it manages it and does transactions without any approval required from anyone. Hence, no one has a monopoly, unlike fiat currencies that have Government regulations imposed.
- Confidentiality of personal details
While opening your account you need to provide all your personal details such as phone number, bank details, and many other things. However, in the case of cryptocurrency, there is nothing like that. The transactions are anonymous. The private key you get with your bitcoin wallet is not to be shared with anyone. The transaction is 100% encrypted, so there is no risk of information getting leaked. So for anonymous transactions, it is the best way. Also for reliable bitcoin trading and investment, the Bitcoin Code platform comes into the picture.
- Quick & Seamless
For cryptocurrency transactions, you don’t need any approval from any third party like in banking transactions. The transactions happen over a peer-to-peer network in a seamless and quick manner. Also, no transfer fee or paperwork is required.
Cons of Cryptocurrency Investments
- Highly volatile
Investing money in cryptocurrency without doing proper research or knowledge is not a good idea at all. Its value can rise or fall drastically in fractions of time. Even if you are an expert and keep a close watch, sometimes you may miss certain market movements and make a wrong decision. Still, whenever you invest or trade, take an informed decision. Most importantly, always be prepared for any potential monetary damages. This means you can gain or lose at any point.
- Illegal activities
Since bitcoin and crypto transactions are anonymous, some people involved in illegal activities like buying and selling of drugs or arms, use crypto as a payment medium. Here, it is not easy to track the offender, but not impossible either. Also, people with black money invest in this to stay away from the government eye.
- Bitcoin wallets are vulnerable
It is true that bitcoin developers have made transactions nearly untraceable and have implemented very high-security mechanisms and authentication procedures.
So, even though it is mainly a safe investment from a hacking perspective, yet some amount of risk is always there. Cryptocurrencies are stored in hot or software and cold or physical wallets like USBs. These need a private key to access them, so if a user forgets or misplaces his private key somehow, it is impossible to retrieve his bitcoins.
- High power consumption
Those who have set up computers for mining cryptocurrencies have to spend a lot on electricity as it requires hi-tech computers that require very high power. Bitcoin miners thus have a huge impact on carbon footprint if coal is used for power generation. As this can be quite negative for the environment over a long period of time, something needs to be thought about.
Hopefully, the discussed information about the advantages and disadvantages of cryptocurrency can make you understand the risk percentage involved. It is essential to know all the advantages and disadvantages properly before venturing into a new investment sector. The benefits are surely going to attract you towards it and may also give you high returns. However, it would help if you do a proper study to avoid any serious loss.