Investing in Cryptocurrency: Is it Worth the Risk?

Ten years ago, most people dismissed the idea of investing in cryptocurrencies. But today, they have become a vital investment option.

Different cryptocurrencies: Bitcoin, Ethereum, Litecoin, Ripple
Image by WorldSpectrum on Pixabay

As a beginner investor, it’s essential to pick an investment that will build wealth and the expectation of a decent return. Unfortunately, cryptocurrencies aren’t backed by the government or any physical asset. So, would investing in cryptocurrencies be worth the risk?

Prices of Cryptocurrencies Fluctuate

Cryptocurrencies are highly volatile. Their prices rapidly fluctuate when compared to other investment options.

According to the BitcoinWiki, Bitcoin’s price was $18,000 on December 8, 2017. It dropped to $3,399 by February 7, 2019, and rose astronomically to $41,940 by January 2021. An individual who bought Bitcoin in December 2017 would have lost money if they sold on February 7, 2019. But an investor who bought in February 2019 would have more than ten times their initial investment today.

On the other hand, one Litecoin (another popular cryptocurrency) was $306.87 on December 15, 2017. It dropped to $30 in January 2019 and has risen sharply to $140 in January 2021.

Investing in crypto is a high-risk and high-reward venture. You can become extremely wealthy, or you could lose most of your money.

Cryptocurrencies Have High Liquidity

Liquidity is the ease with which you can buy or sell an asset close to the market rate. Cryptocurrencies like Ethereum or Bitcoin have high liquidity; trading them doesn’t significantly reduce their price. Others have lower liquidity but can still be sold and bought at a better market rate than stocks. Still, all cryptocurrencies are easy to buy and sell.

Cryptocurrency trading platforms usually have high-technological tools that help investors make good decisions. They also have several trading and purchasing methods, like algorithm-based trading and limit orders, that aid in quick and easy trade.

The Future Looks Bright for the Crypto Market

Although cryptocurrencies have frequent price fluctuations, their value keeps rising in the long term. Unlike the stock market, the crypto market hasn’t crashed. Prices of major currencies in 2021 are higher than they were in 2019.

The crypto market is projected to keep growing in several years. If you were to ride the tide, your investment portfolio would keep increasing in value. Besides, financial institutions, big companies, and wealthy individuals have taken an active interest in the market. This trend reduces the chances of cryptocurrencies crashing in the future.

Conclusion

For any beginner investor, cryptocurrency might be the shiny new kid in the block. If you aim for high returns or you’d rather rely on its capacity to rise in the next few years astronomically, you may invest in the asset.

Cryptocurrencies also have the advantage of selling and buying at a price close to the market rate. Nevertheless, prices can fall by more than 70 percent, which would drop your investment’s value to less than half of the original cost.

Despite that gloomy possibility, investing in cryptocurrencies is worth the risk. It’s advisable to invest in more stable options like Bitcoin and Ethereum.

Fiction Author | Finance and Technical Writer