In the last few years, the cryptocurrency market has received more media attention and generated enormous returns.You may have read accounts of people who invested in Bitcoin, Dogecoin, or other altcoins and went on to become millionaires.
There are also a lot of detractors in the media and traditional finance who claim that cryptocurrency is a huge bubble that is about to burst or that the ideal moment to buy has passed.
In the past, Bitcoin has been a wonderful investment, according to historical returns. The price of many of the most popular cryptocurrencies surges dramatically, then collapses, with an overall rising tendency. Although past results do not guarantee future success, governments, financial institutions, and investors are increasingly adopting cryptocurrency.
With cryptocurrencies, there are several ways to generate income. Of course, you can purchase cryptocurrency and then sell it at a higher price. Staking, lending, and Decentralized Finance are among other ways to hold the coin and earn more (DeFi).
These choices are easy to use and include interest rates ranging from 5 to 10%, with some DeFi programs offering yields as high as 100 to 200%. This is in addition to any future coin appreciation.
Innovation
For its innovations—decentralized, secure, quick, and borderless transactions—cryptocurrency appeals to a lot of people. In Web 3.0, where cryptocurrency and blockchain are at the fore, you don’t have to worry about Meta or Google tracking your online activities and selling your data.
Only if you believe the price will rise over time can you determine whether an investment is good. Our current monetary structures are centralized, slow, and out-of-date. Innovation is the last thing that comes to mind when you think about banks and governments.
Future applications of cryptocurrency as standard money can take many different shapes. Ethereum and Bitcoin might become legal tender. Or central bank digital currencies (CBDCs) and stablecoins like USDC or Tether will spread widely. Cryptocurrency investments are a sure bet for the future, whichever way.
Fluctuation and Risk
Of course, investment involves risk, and because there is less regulatory oversight of emergent asset classes like cryptocurrencies, there is more risk involved.
The project developers in many initial coin offerings (ICOs) sell a huge number of coins, which causes the market to drop and all other investors to lose money.
Similar rug pulls occur frequently with DeFi as well, where the developers may be unknown and little information is disclosed to investors.
When buying cryptocurrency, one assumes additional risks. Even though the aforementioned corporation is not engaged in the development or investment of cryptocurrencies, it can nonetheless have a significant impact on the price of a cryptocurrency if it accepts Bitcoin or Dogecoin as payment.
Cryptocurrency has always been erratic, and it probably always will be.
Even the coins with the highest market caps, like Bitcoin and Ethereum, see 10- to 20% daily price fluctuations. Altcoins’ price fluctuations can get progressively worse. Although cryptocurrency is very liquid, volatility may not settle for weeks or months.
Since you are purchasing a currency rather than a share of a publicly traded firm, cryptocurrencies are special. Your returns are not dependent on the success of the aforementioned company, but the cryptocurrency is not immune to corporate, national, or general market trends.
Although cryptocurrencies are decentralized, centralized entities like governments can have a direct impact on their pricing, as China did when it forced all Bitcoin miners to leave the country in 2021.
The miners moved as a result, and many people sold Bitcoin out of panic, which led the entire cryptocurrency market to plummet.
Additionally, there is a possibility of coin loss or hacking. The risk of decentralization is that you will be solely responsible for your transactions.
data security and passwords.
“Nor your keys, not your coins,” goes the proverb. You run the danger of misplacing your coins if you don’t have access to your private wallet key, as you would with a Trezor wallet.
Obtain the Dip
Buying extra coins when prices drop is referred to as “buying the dip” in the cryptocurrency world. By doing this, you can buy more cryptocurrency at a discount. Future volatility is a given, thus the best way to deal with it is to purchase the dip.
Without a question, cryptocurrency is the future of money in one way or another. It’s improbable that investors today will see returns of 1,000–10,000%, but it’s never too late to invest and grow your money.
This piece is not intended to be investment advice. Always invest just what you can afford to lose while investing.