Cryptocurrency: Risks and Benefits

Martin Singh
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Cryptocurrency: Risks and Benefits

If you haven’t heard about cryptocurrencies, you are probably from another planet. In the past few years, the hype about Bitcoin and other cryptocurrencies have been going through the roof. Many people managed to make a fortune thanks to Bitcoins fast rise in 2017. Others lost some when it stopped growing and even dropped.

People use home computers to mine Bitcoins. Others try to earn money working with cryptocurrency exchanges. In fact, cryptocurrencies managed to do something extraordinary. They gave people in the 21st century a new way to earn money.

However, the numerous benefits of dealing with cryptocurrencies come with about the same number of risks. Experts in crypto and accounting agreed to share several risks and benefits of dealing with cryptocurrencies.

Risks Of Investing In Bitcoin And Other Cryptocurrencies

There are numerous risks of investing in cryptocurrencies. Many people run into them due to the lack of information about the subject.

Cryptocurrencies are very different from other currencies. The biggest difference is that they are on their own. There are no precious metals to back them up. To get the currency, you need computers, math, and electricity. No physical coins or notes exist. There are no physical bags of money lying in the banks.

As a result, the currency is 100% virtual. It doesn’t exist in the physical world. Since nothing exists to show for it, the balance can be wiped out without any consequences. Thus, a cryptocurrency investor can lose all the money in a flash.

The other risk is related to the amazing volatility of the cryptocurrencies. The fluctuations we have been observing in the past two years are impressive. In just one month, a cryptocurrency can go from three to one thousand dollars per coin. You never know what you are going to get for your Bitcoin tomorrow. The financial experts believe that this volatility is not about to vane in the nearest future.

Even though cryptocurrency is based on blockchain technology, there is still a risk to the security of the virtual money. Cybersecurity experts are working hard to stay ahead of the hackers. However, what would happen if they suddenly lose just one battle?

Benefits Of Investing In Bitcoin And Other Cryptocurrencies

As surprising as it may sound to people, who have seen others make a fortune with Bitcoin, there are fewer benefits than risks. In fact, to some experts, Bitcoin is a bubble, which is about to burst. Others compare it to the roulette or a slot machine. You can win big. But most likely, you will lose.

One of the major benefits of cryptocurrency is the convenience of use. Transferring the funds between people and companies is easy and fairly safe. Using blockchain technology ensures transaction safety. The fees for transferring funds are very small due to the absence of the third party.

The other benefit is transparency. If the security of exchanges may be undermined, the safety of blockchain transfer is almost 100%. Using blockchain to make transactions keeps all the parties honest. Smart contracts speed up the business relations and deals.

Another benefit of cryptocurrency transactions is an option of anonymity. Meanwhile, cryptocurrencies don’t depend on exchange and interest rates.

Overall, cryptocurrencies are risky but potentially profitable. Some experts believe that blockchain and cryptocurrencies are the future of financial transactions. Learning the basics about cryptocurrencies is a must. Investing in them is everyone’s personal choice.

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