(listicle)

Cryptocurrency continues to seize the attention of the financial world, and 2024 is no exception. Although there has been a sharp rise in both awareness and control over cryptocurrencies over the past few years, there are still notable challenges in deciding whether to invest in crypto. Let’s have a look at the pros and cons to help you make a conscious choice.

The Advantages of Investing in Crypto

1) Independent

Cryptocurrencies operate without a central authority, giving investors absolute financial autonomy and protecting assets from government intervention or monetary policies.

2) Inflation Protection

Unlike traditional currencies that can lose value due to inflation, cryptocurrencies like Bitcoin have mechanisms to defend against it. Bitcoin, for instance, has a hard cap of 21 million coins that can ever be mined. This limited supply creates scarcity, which can increase value over time as demand grows.

3) Portfolio Diversification

Crypto often behaves differently from traditional markets, such as stocks and bonds. By diversifying your investments, adding it to your portfolio can help reduce overall risk.

4) Fast and Affordable

Crypto enables rapid, low-cost global transactions without the need for intermediaries like banks or payment processors. All you need to buy a cryptocurrency is your smartphone or a computer and the internet connection. It’s much faster than traditional banking institutions.

5) Secure and Transparent

Blockchain technology underpins cryptocurrencies, providing a transparent, tamper-proof ledger for transactions. Since the blockchains are decentralized and independent, you can easily and instantaneously see money transfer transactions through the platform’s blockchain explorer. This boosts trust and security in financial dealings. Furthermore, there’s no involvement of a third person, so you can be sure your account is secure.

The Disadvantages of Investing in Crypto

1) High Volatility

Crypto prices can swing dramatically. For instance, Bitcoin surged to $65,000 in 2021 before plummeting below $20,000 the following year. And vice versa, in 2023 the closing price of Bitcoin was $25,000, while in 2024 it has reached circa $74,000. Such fluctuations make it a risky choice for some investors.

2) The Danger of Hacks and Scams

While the blockchain itself is secure, wallets and exchanges remain vulnerable to cyberattacks. Recovering stolen funds is often impossible. However, these attacks are usually only a threat to recently hard-forked networks (*branching of a cryptocurrency’s blockchain that splits a single cryptocurrency into two) and new blockchains.

3) Lack of State Supervision

Governments worldwide have yet to fully regulate cryptocurrency, leaving its future subject to unpredictable legal changes that could impact its value. Although some people consider the lack of government control positive, this can cause various challenges in the future, e.g., taxation complications, restrictions on the use of certain cryptocurrencies, potential asset freezes, etc.

4) Hard for Beginners

The technical aspects of crypto, like understanding wallets, private keys, and tokenomics, can be confusing for newcomers. Understanding blockchain technology, wallets, tokenomics, and the risks involved requires a long learning.

5) No Refund Policy

Crypto transactions are irreversible; they cannot be undone. If you make a mistake or send funds to the wrong wallet, recovering them is likely impossible.

Is Crypto Right for You?

Investing in cryptocurrency requires a clear understanding of its risks and rewards. If you’re willing to embrace volatility, conduct thorough research, and only invest in what you can afford to lose, crypto could be an exciting addition to your portfolio. For those seeking stability and predictability, however, traditional investment avenues may be a better choice.