Cryptocurrency can be a good investment if you’re willing to accept that it’s a high-risk gamble that could pay off, but there’s also a strong chance you’ll lose all your money. >Cryptocurrency prices, including bitcoin, have been falling in 2022 amid a global cryptocurrency price crash.
It is important before investing in bitcoin or other cryptocurrencies that you enter with your eyes open.
Reading: Is bitcoin a good investment 2021
In this article we explain:
- if it is a good idea to invest in cryptocurrencies
- the risks involved in investing in cryptocurrencies
- if cryptocurrencies are a good way to earn money
- Are cryptocurrencies a good long-term investment?
- Is ethereum a good alternative to bitcoin
- Is bitcoin a good hedge against inflation
related content: should you invest in bitcoin?
This article contains affiliate links that can generate income for us.
Is it a good idea to invest in cryptocurrency?
If you invest in cryptocurrencies, do it based on the facts, not the hype, and there is a lot of hype.
Before buying and selling digital currency, learn about the risks so you can judge whether investing in it is a good idea for you and your personal finances. here, we help you understand how cryptocurrencies work.
the bank of england would not agree that it is a good investment. Governor Andrew Bailey warned that people who invest should be prepared to lose all of their savings.
what are the risks of investing in cryptocurrencies?
Governments and financial regulators in almost every country have warned investors about the risks of buying cryptocurrencies.
When an investment starts making headlines, in ads, or through celebrity endorsement as a way to get rich, investors pile in without thinking about the risks.
1. volatility
Extreme volatility is a defining factor of cryptocurrencies. while you can get high returns, you could lose everything.
read the experiences of a one time money mentor reader: “buying bitcoin instead of spending on nights out has made me $16,600.”
2. scams
As of November 2021, around £1 million–in cryptocurrency scams were reported to Santander UK each month by its customers. the actual scale of the fraud is much larger.
One of the most common types is when a criminal hacks into your computer and locks out your account.
3. False promises of high returns
Cryptocurrency companies may also be exaggerating how much investors could receive by investing in cryptocurrencies, while minimizing the risks.
4. no compensation scheme
UK bank deposits are almost always covered by protection schemes such as the Financial Services Clearing Scheme, this is often not the case for cryptocurrency investments. If a cryptocurrency exchange goes bankrupt, there is no guarantee that you will get your money back. if you lose your password, again, there is no one to turn to for recovery.
For those who want to get to grips with cryptocurrency investing, check out our article: 6 Cryptocurrency Tips (and 5 Mistakes to Avoid).
“The fca is aware that some companies are offering investments in crypto assets, or loans or investments linked to crypto assets, that promise high returns. if consumers invest in these types of products, they should be prepared to lose all their money.”
Are cryptocurrencies a good way to earn money?
Early investors in cryptocurrencies like bitcoin will likely have made money: if you had invested £310 to buy a bitcoin in April 2016, six years later your investment would be worth around £24,000.
See also: Top 25 www brcc net hottest now
the price of bitcoin soared through 2021, hitting all-time highs of just under $67,000 in November, but fell to $29,000 (£23,700) at its lowest point in May 2022.
While that’s certainly worth more than £310 for a bitcoin, it shows just how volatile even the most popular cryptocurrency is. bitcoin price has been falling in 2022 amid a cryptocurrency sell-off as investors shy away from riskier investments at a time of rising inflation and interest rates.
Some of the world’s largest cryptocurrency exchanges are listed on major stock exchanges. the san francisco coin base* debuted on the united states nasdaq stock market in april 2021 with a value of over $100 billion (£70 billion), making its market capitalization more double that of barclays bank.
but as of May 16, 2022, the value of coinbase had fallen to $15 billion.
New cryptocurrencies, most using blockchain technology, are emerging all the time. some are intended to replace traditional currencies, such as pounds or dollars, while others are used to create new types of financial applications or exchange value between various digital currencies.
so if you’re considering buying digital assets, take a hard look at individual projects to see how they might perform in the future.
Are you buying a completely useless digital currency or something that offers innovative solutions to existing financial problems? If you’re new to digital assets, read our cryptocurrency trading for beginners article here.
what are the average returns of cryptocurrencies?
tthere is no guarantee that a cryptocurrency will remain in action in the long term.
For example, of the top 10 cryptocurrencies by market value in 2013, only seven are still in business today.
Using industry data provider coinmarketcap.com, the top 10 cryptocurrencies in 2013 were:
- bitcoin
- litecoin
- peercoin
- namecoin
- feathercoin
- terracoin</li
- devcoin
- freicoin
- novacoin
- chncoin
In 2013, a bitcoin was worth just under $112 and had a total market value of just over $1.2 billion. As of May 16, 2022, one bitcoin is worth approximately $30,000 and has a total market value of $1.3 trillion.
Eight years ago, a litecoin was worth $3.38. in April 2021 it was worth around $245 per coin. now it’s worth $67.
devcoin, novacoin and chncoin are no longer listed on coinmarketcap, while two of the top 10, freicoin and terracoin, have actually lost value in the intervening time; terracoin is worth a fraction of what it was in 2013.
so buying smaller coins and holding them as a long-term investment won’t necessarily make anyone real money.
There is a constant stream of new cryptocurrencies entering the market. Dogecoin is just one recent example that took off in May 2021, but has struggled to maintain momentum from investors.
Is ethereum a good investment?
If the price of any asset rises rapidly, there is always the possibility that it will fall just as rapidly. we have seen it with ethereum in 2022.
A correction is generally defined as an asset falling by more than 10%. which can be a good buying opportunity for an investor.
Launched in 2015, ethereum has been on a steep upward trajectory since July 2021, hitting its all-time high of $4,617. at the end of January 2022, its price had fallen to $2411 and as of May its value is $2021.
Keep in mind, though, that nearly two years ago it was around $122. It remains one of the most popular cryptocurrencies in large part because it has more uses than just being a cryptocurrency.
See also: Top 29 fastly price prediction hottest, don’t miss
ethereum is used in smart contracts and payments. visa recently said it would use it to record cryptocurrency payments.
When you look at the history of bitcoin, it hit the £10,000 mark after about four years, so ethereum could follow a similar trajectory given its popularity.
But remember there are no guarantees, so don’t put all your eggs in one basket. check out our guide to bitcoin alternatives here.
The important thing to keep in mind when investing is that you only lose money if you sell when the investment falls below what you paid, since you end up crystallizing your losses. read more in our investment guide for beginners.
Are cryptocurrencies a good long-term investment?
yes, according to sophisticated investors like banks, hedge funds and pension funds.
More of them are investing in crypto than ever before, with investment banking giant jp morgan chase advising in February 2021 that investors might consider putting 1% of their investments into bitcoin as a way to diversify their portfolio. .
However, this investment advice is aimed at financial professionals, not the average investor who owns a few thousand pounds worth of stocks and shares.
Investing in cryptocurrencies that are not particularly well known or supported is fraught with serious risks.
Some of the early investors who have persisted have evidently struck it rich. the ones that don’t? well, it should be pretty clear that its value has been reduced to almost nothing.
The most serious investors in cryptocurrencies will not consider putting their money in projects that are not yet very well known.
top tip:
- Look at what sophisticated investors buy. pension funds or university endowments, which manage billions of pounds of cash and specialize in long-term investments, will often only invest in bitcoin, if they invest in cryptocurrencies at all.
Bitcoin is the original cryptocurrency and has high long-term value because it has never been hacked and has maintained 100% uptime since launch.
is bitcoin a good hedge against inflation?
Investment professionals have been talking a lot about digital currency as a way for investors to hedge against inflation.
When inflation rises, as it is right now, the value of cash in a savings account declines over time. As the years go by, we are able to buy fewer goods and services with the money in our bank accounts.
investment options promoted as a “hedge” (government bonds or gold, for example) tend to hold more of their value than cash over the long term, or tend to be unaffected by declines elsewhere of the economy. .
This is why much of the long-term investment advice focuses on moving cash from our bank accounts into stocks and shares, or assets like cryptocurrencies, which could appreciate over time.
In the bitcoin code is the promise that no more than 21 million bitcoin units will ever be created. So instead of being an inflationary currency like the British pound or the dollar, some experts argue that bitcoin is the opposite: it’s deflationary, increasing in value over time.
Of course, the deflationary argument in favor of bitcoin collapses if governments decide to regulate specifically against it. India, for example, has proposed a ban on cryptocurrency trading, suggesting it will impose fines on anyone caught with digital assets of any kind.
The regulatory uncertainty surrounding bitcoin, and cryptocurrencies in general, is one of the reasons so many investors write them off entirely.
is cryptocurrency a good investment? checklist
- Cryptocurrency investors should do their due diligence, just as they would any other investment.
- Think carefully about which cryptocurrency has the genuine potential to change the world.
- try not to be swayed by malicious money thieves who shout that this or that coin is “going to the moon”.
- remember that there is nothing like losing a month’s salary in a day so that an investor is right to come back to earth.
*all products, brands, or properties mentioned in this article are selected by our writers and editors based on first-hand experience or customer feedback, and are of a level we believe our readers expect. this article contains links from which we can earn income. These revenues help us support the content on this website and continue to invest in our award-winning journalism. For more information, see how we make our money and editorial promise.
See also: Malaysia Cryptocurrency Regulation – Is it Legal? – ComplyAdvantage
