Should You Invest in Crypto : Good or Bad Investment?

What is it that never goes out of trend/trolls/twists? The answer is Cryptocurrency.

With trillions of dollars invested in new crypto projects released daily, the question around all this hype persists, ‘Is Cryptocurrency a good investment? When you read the news about scams like the TerraUSD stablecoin or Squid Game token and every other altcoin, and read the numbers of how much investors lose, don’t you wonder whether they took that as a calculated risk? And even with the endless volatility that they experienced, will they continue to risk investing in Cryptocurrency?

Cryptocurrency: Good or Bad Investment? 

In March 2021 when Bitcoin was at its all-time high, almost all the investors thought they’d get filthy rich. Cut to July 2021, Bitcoin prices dropped by 50% and it soared through the year and most of 2022, recording its lowest at $29,000 in May 2022. Yes, a handful of the investors made a ton of money who acted in that span of four months in 2021 but what about the rest?

The trend started in western waters and to tell you the truth, more than 40% of US adults either are somewhat knowledgeable or not at all knowledgeable about this digital form of currency, as per a recent Huobi report.

Even the best-of-the-breed investors are shooting in the dark. And now with rising inflation and higher interest rates, many of you must be finding this riskier than ever.

Well, it is not just you but the major investors and companies too. Coinbase, which made its debut on NASDAQ in April 2021 with a valuation of over $100bn (way higher than even Barclays Bank), fell to $15bn by May 2022. Super uncertain right? In this article, we’ll guide you through these uncertainties and help take a smarter call.

Before that let’s understand what is cryptocurrency.

What is Cryptocurrency?

Digital money does not exist in physical form and is neither backed by any government. It is community-driven which makes its value fall or rise. Cryptocurrency is a form of digital money.

So now you can imagine that if it exists electronically, it can be bought, traded, and even used as a mode of payment online.

These currencies are run on blockchain technology which brings about all of its traits. A blockchain is a distributed ledger that is powered by miners. While blockchain itself is virtually impenetrable, cryptocurrencies can still be risky investments.

Even the most secure ones are incredibly volatile. For example, Bitcoin’s blockchain being the oldest is the most secure but it’s very common for Bitcoin to just dip 80-90% of its value.  

Today there are over 10,000 different Cryptocurrencies in the market so the security can’t be one size fits all here.

How to Choose a Cryptocurrency?

If you are one of those who see an ad for Cryptocurrency and feel like making a purchase or purchasing it by responding to some random message that is claiming to get you rich, we have outlined some pre-work checklist for you that will aid to choose the right cryptocurrency in the future.

1. Plan By Outlining Your Financial Goals, Risk Tolerance

This is needed for you to identify the timeframe and decide how much of the investment bracket you can go up to, and define your limits.

2. Conduct Due Diligence on the Crypto Project You are Considering

Yes, simply following a tip from some friend or a group on the internet ain’t right. FOMO can lead to unhealthy habits here. Read the white paper of the digital asset you are considering, and understand its purpose, vision, use case, edge case, and technology.  
Other than this, to confirm that the currency is legitimate before you hand over all your details, you must also:

• Lookup the website of the Cryptocurrency you are considering (green signal is when it is a functional and secure one, not the unsecured single pagers),
• Lookup for the Cryptocurrency’s security rating on CertiK or Crypto Rating Council,
• Lookup the historical performance of Cryptocurrency through Coinranking. This will help you to think through your investment thesis.

3. Find a Secure Platform

Platforms such as Square, PayPal, Square, and Venmo are reputable and enable users to complete the purchase of Cryptocurrency. Or you can check out the platform for exchanges such as Gemini or Coinbase.

These are the few steps you can take to mitigate or minimize the investment risk linked to Cryptocurrency. If this still doesn’t work for you, you can always choose the route known to most and buy stocks of companies like Block, and Coinbase, or invest in an exchange like CME Group (NASDAQ: CME), which facilitates cryptocurrency future trading.

Is Cryptocurrency a Good Investment?

Many folks see it much more as a long-term than a short gain bet. There are assumptions that Cryptocurrency will one day replace fiat and gold currency. This time will only tell.

As for Cryptocurrencies, the inflated values are due to the survivor bias where the investor is viewing the performance of a handful of Cryptocurrencies as the comprehensive pool of all the thousands of cryptocurrencies that have gone bust.

A few traders are looking at it as a short-term bet and they invest accordingly. Whether you see it as short-term or long-term, you must only invest money after deciding your limits and researching thoroughly which means investing the money you can even afford to lose.

There’s no guarantee with the rise of Cryptocurrency’s value and it can be as irregular as the change in a year or not for a long time.

Conclusion

Timing matters a lot. The crypto market is always anticipated to crash with no hope for arrival at all. Even the best cryptocurrencies face high risk. Well, there is an upside to getting returns quickly too. You get returns quickly! So as long as you do not get stuck in the greed cycle, you are good. And please remember, it’s wise to start small, test the waters, and plan the next steps accordingly.

And while you are doing that, we recommend you follow the checklist items we mentioned above. We are sure they will guide you through the right decision.