Cryptocurrency / Lifestyle

5 Pros and Cons of Investing in Cryptocurrency

investing in cryptocurrency

Hearing just one side of the story is one of the simplest ways to develop a biased view of things. The problem with online research is that it’s so easy to walk into the epistemic bubble or echo chamber. Here, you’ll just get a feedback loop of all the things you already wanted to know. Instead of finding out new things, you’ll be stuck with a community that just confirms what you already believe.

This is especially the case when it comes to investing in cryptocurrency. So, in order to avoid this becoming an issue, here are five pros and five cons of investing in cryptocurrency in 2024.

Pro: Potential for high return

First, cryptocurrencies have immense return potential. You can invest a small amount of money into one of the fastest-rising cryptos and see incredible results in just a few years. The results will be significantly higher than those of the majority of other platforms.

High volatility is often described as a con. However, it’s just a description of a market state —neither good nor bad. It’s like describing a sport as adrenaline-inducing. Whether this is good or bad depends on what you’re looking for.

It all comes down to comparing available options and using objective metrics for risk assessment. If you play your cards right, you stand to profit significantly. Michael Graw recommends popular coins like BTC and ETH, but also highlights the promise of newer coins like SMOG, which can have more growth potential as their values are currently relatively low.

Con: Potential for higher loss

As we’ve already mentioned, the volatility of the market may come back to haunt you. BTC can go from 60k to 11k within a single year. It wouldn’t be odd (it wouldn’t even be the first time) for something like this to happen. When it comes to smaller investments, things can get even more extreme.

All of this creates psychological pressure, and people develop a condition known as loss aversion. In this state, they fear losing money more than they rejoice over the prospect of earning a fortune. This impairs their judgment and induces fear. Worst of all, due to this volatility, some investors will be completely turned off by the idea of making this investment. 

Pro: Diversifying your portfolio

Cryptocurrencies are relatively new assets, and as such, they have a low correlation with other investment assets. This means that their increase in value isn’t necessarily tied to the factors that affect other assets.

For instance, while traditional assets (like stocks) rely on financial and political stability to thrive, cryptocurrencies work perfectly well in a chaotic market. The fact that you can make transactions easy and effortlessly, as well as the fact that you can send and receive them without proving your identity already, means a lot. All in all, cryptocurrencies are amazing for volatile conditions and unstable eras. 

Cons: Cybersecurity

Many people are uncomfortable with the idea of keeping all their assets in digital format. Some love the feeling of cash or gold in their hands. They prefer assets that they can pack in a bag, stuff in a safe, or even bury in their backyard. 

While crypto wallets always have top-notch encryption and now even have blockchain support, they have one major concern. Once the transaction is over, there’s no cashback, and it’s nearly impossible to prove fraud. When the money exchanges hands, that’s it, which is what makes so many people uncomfortable with overcommitting to this asset. 

Pro: Easily accessible investment

Previously, we’ve already addressed the fact that you can send money completely anonymously via crypto wallets. You don’t even have to give them your name. 

You also don’t have to leave your home, which makes it a perfect money-making opportunity for people who are otherwise prevented from finding other employment. Stay-at-home parents, remote workers who don’t have time to take on another job, and even people with disabilities can make a profit without ever having to leave their homes. This alone makes this opportunity truly unique and appealing. 

It’s also amazing for sending remittances to unbanked and underbanked areas.

Con: Learning new skills can be scary

None of these things are really difficult. Registering a crypto wallet, buying crypto, understanding how blockchain works, etc. The problem is that it’s completely new and unknown, which makes a lot of people uncomfortable.

To make matters worse, you have such a limited amount of knowledge and resources available. First of all, this asset has only existed since 2008, which is not that short, but compared to any other asset (like gold, which is a store of value and a currency for thousands of years), it’s relatively new. This means that options for historical reference are relatively limited.

Pro: Adoption is on the rise

Even if the pace of adoption is not as high as it seemed it would be in 2017, the truth is that, with each passing year, more and more people are adopting cryptocurrencies.

In the past, only the tech-savvy people used crypto. Today, you can buy with crypto, pay with crypto, and even get paid in crypto. This latter is especially popular among remote workers. 

The reason why all of this matters so much is because you (still) have an option to be an early adopter. This is the most profitable state and the most profitable decision that you could possibly make.

Con: Regulations are just catching up

For the most part, cryptocurrencies are not regulated (or, at least, not well regulated). This brings in an air of uncertainty. First of all, a lot of people are not comfortable with investing in an unregulated asset. Second, until the regulation is finally here, we can only speculate about the direction that it will take. What does this mean? Well, the regulation could go either way. It could favor crypto or it could result in a complete ban (like in China).

For a lot of people, the only sensible approach is to wait and see.

Pro: Low entry threshold

Because cryptocurrencies are a relatively new asset, the majority of smaller cryptos, ICOs, and presales are dirt cheap. Not only that, but you can buy vast quantities of them without ever breaking the bank. If they make it, you earn big. If not, you lose small.

The truth is that more valuable assets require a pretty substantial amount of capital for a significant buy-in. Here, you can start really small while still having the potential to go big. This is something that attracts small investors (even first-time investors) to crypto. 

Con: Research is not so easy to handle

One of the biggest challenges with crypto is that although research resources are pretty widely available, the problem is that there are just too many materials. Most of the time, you won’t be able to tell apart opinion pieces from studies and facts.

The truth is that online moderation still isn’t on the level it’s supposed to be, which is why you need to try very hard to identify credible sources of information and stick to them to the best of your ability. 

It’s vital you know both the good and the bad before investing

You must hear the bad with the good regarding any of your ideas. Without having the full picture, you cannot consent to the risks in the right sense of that word. Sure, there’s always something you don’t know, some perspective you lack, but it’s in your best interest to get as many angles on your decision as possible.

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