Cryptocurrencies have enticed the attention of many people, especially those who are interested in investing their money. Who would not be lured by making thousands if not millions of dollars using these digital tokens? You can make a huge profit, but it comes with great volatility and risk. That’s why it is essential to familiarize yourself first with cryptocurrencies before investing. You must know the good and bad sides of it.
The Good Side
- Massive potential returns
There are many crazy stories about making money using cryptocurrency. A few altcoins or alternative coins have soared into the market cap and are included in the top 10 tokens. Those altcoins increase almost 1000 percent. Thus, there’s a significant possibility of making enormous profits if you’re using those profitable altcoins.
- Liquidity
Cryptocurrency investment is liquid. That’s why it would not lock up for years, unlike in traditional investments. You need not wait for others to buy your equity to gain profit. The crypto market is open 24/7, thus sell or buy anytime you want. All you have to do is to monitor for any market fluctuation.
- Transparency
With transparency, look for major cryptocurrencies that show their undertakings. It is important to know all the details explaining the technology and the project. The whitepaper may include the roadmap, their code, and team members.
The Bad Side
Knowing the bad side of cryptocurrency will guide you on what to avoid.
- Inexperienced teams
Every cryptocurrency is building or conceptualizing a product to address a specific problem. One downside of cryptocurrencies is having a team with less experience. Some members of the team have insufficient knowledge, especially those startups. If the team is not well-managed, there’s a significant possibility the project will fail. The best thing to do is to check on LinkedIn about their experience.
- Technical difficulties
Not all investors understand cryptocurrencies are digital. Unlike many investments that you can hold physically, Bitcoin is the other way around. Since these assets are digital, it comes with technical difficulties. When the exchanges and markets are busy, they can be too slow. Withdrawals and deposits are disabled during congested networks. It means that you cannot move or sell your coins during such a scenario.
- Security
Although crypto experts say that investing in this digital asset is secured, still some lapses come on the way. Some exchanges have been hacked and resulting in losing millions of dollars. The drawback is that digital assets are not insured with FDIC. That’s why you must be careful when selling, buying, or storing coins.
Takeaway
You must use a cold storage wallet with private keys so that you can have full control over it. The private keys provide access to the blockchain. Keep it in a secure place and offline.
Investing in digital assets like cryptocurrencies is risky. The market is very young and volatile. But it offers a great opportunity to get an enormous profit. Do thorough research before putting your money into it and study all the ups and downs.