As difficult as it is to ignore the excitement around cryptocurrencies these days while making huge investments, the risks, and downsides of cryptocurrency could be scary and even depressing. The surge in Bitcoin post-covid spelled a new era for crypto especially touching highs of $63k per coin. Currently, it seems BTC is struggling to relive the past at least for now.
Owning so much crypto could make you a millionaire overnight if there’s a significant upsurge in the value of the currencies. In fact. this could be one of the ways to make money passively.
However, have you ever thought about the risks, dangers, and possible collapse of the crypto market? Do you think crypto is dead? I will more share insights into this.
Key Takeaways
- There is no 100% assurance of success when investing in cryptocurrencies because there are inherent risks and dangers involved.
- Like any digital asset, cryptocurrencies are susceptible to theft and hacking.
- Cryptocurrencies are viewed by many experts as having the ability to revolutionize the financial sector and present fresh chances for development and expansion.
- Prices on the cryptocurrency market could change quickly and unexpectedly, making it a very inconsistent market.
- Decentralized finance (DeFi) applications, for instance, are becoming more and more popular and provide users with fresh ways to profit from their cryptocurrency holdings.
Crypto – How It All Started
The creation of Bitcoin in 2009 opened the door for a plethora of other cryptocurrencies that provided a fresh and unexplored way to invest money and increase wealth through the cryptocurrency market.
After its invention in 2009, Bitcoin started trading in July 2010 at US$0.0008 and surprisingly there was an upsurge that increased it to around US$0.08 by the end of the month.
As time went on, Fortuna (the Greek goddess of fortune and the personification of luck) smiled at the rising of the digital currency and it gradually increased to around US$10 before surging significantly to US$250 in April 2013. What once sold for as low as US$0.0008 could now be seen today as high as 26,485.8 USD with a total market cap of 517,094,222,078.35 USD.
Despite the profitability in the rise of cryptocurrency, the crash of Bitcoin over time has got many people wondering whether or not there’s still hope for cryptocurrency. Take for instance Crypto crashed by -99% in June 2011, -56% in August 2012, -83% in April, and -50%in December 2013, -84% between December 2017 and December 2018, -50% in March 2020, and -53% in May 2021.
To crown it all, in November 2022, after it spiked to hit an all-time high of $69,000, the value of Bitcoin, which is the most well-known cryptocurrency, fell to $16,000. This great fall from around $69,000 to around $16,000 got a lot of people talking about how much hope is left in crypto. This dramatic downturn birthed the question: Is Crypto Dead?
Of this sudden imperceptible fall, many people have speculated that this could be the end of cryptocurrency.
As cryptocurrency values have fallen far from the record high that Bitcoin and other cryptocurrencies reached in November 2021, Bitcoin (BTC) and other altcoins like Ethereum (ETH) and Stablecoin (SBC) were put under numerous assessments.
As a result, some market analysts assert that cryptocurrency is no longer relevant, while some say it’s not worth investing in. But, could this be the case?
What do these predictions, judgments, and assertions entail, especially for people who have already made investments in one cryptocurrency or the other? Now here is the big question:
Does investing in cryptocurrency still make sense and is profitable, or we should believe that crypto is dead?
Is Cryptocurrency Actually Dead?
Straight to the point, crypto is not dead. Crypto is still very much alive and it doesn’t appear like it could, will, or ever needs to be shut down, let alone dead. Cryptocurrency is not extinct and there is no indication that it would g extinct.
Despite major ups and downs throughout the years, the cryptocurrency market has continued to expand and change tremendously. In reality, a lot of experts say that cryptocurrencies have the power to alter the financial sector and the way we see value and money.
The brain behind the emergence of Crypto with Bitcoin being the first is Satoshi Nakamoto who developed the technical framework that underpins cryptocurrencies. The security, integrity, and balance of ledgers are upheld in a proof-of-work system by a group of people known as miners.
In general, there is a lot of unpredictability and volatility because the Bitcoin market is still growing. Before making any decisions, as with any investment, it’s crucial to thoroughly weigh the risks and conduct your research.
Understanding the advantages and disadvantages of cryptocurrencies as an investment opportunity from the first time you purchase a digital currency will help you choose whether it is appropriate for you as a buyer considering your specific needs.
Even in specific situations – whether in a bull or bear market, the knowledge acquired will help you thrive. Despite the volatility and unpredictability of the cryptocurrency market, it has grown tremendously in recent years.
Numerous governments are investigating the possibilities of digital currencies, and major financial institutions and corporations are adopting cryptocurrencies more frequently even as a valid means of payment.
1. Decentralization
The entire crypto space for some currencies like Bitcoin and Ethereum ecosystem is decentralized, which means it is not governed by a single authority. Blockchain technology, on the other hand, makes the crypto space and transactions as transparent as possible.
As a result, international transaction fees and exchange rates do not apply to investors. Furthermore, the decentralization of crypto implies that cryptocurrencies are independent of changes in governmental regulations, as well as the leadership of a nation’s central bank or any other government agency. This means that neither inflation nor deflation has an impact on cryptocurrency.
2. Diversification and asset allocation
Ever heard the saying “Don’t put all your eggs in one basket?” Well, this may apply to Cryptocurrency as it could be a useful tool for portfolio diversification which could be quite beneficial.
Moreover, cryptocurrency is frequently asserted to have a low correlation to conventional investments like stocks. The decentralized nature of cryptocurrency is still at play here since they are less impacted by general government policy, therefore they are less susceptible to negative economic effects like inflation than stocks or bonds. So if you plan on investing in crypto, think of diversification.
3. Rates of change (Volatility) and returns
For the most part, investors would prefer to avoid volatility because the ups and downs could make you lose something huge in the twinkle of the eye. It might, however, be useful in different ways.
By aggressively selling and purchasing assets to profit from market ups and downs, speculators have historically leveraged volatility to increase returns. Take for instance the bitcoin market is most certainly volatile. A quick approach to gaining some significant profits is through the peaks and valleys, highs and lows of Bitcoin and its competitors. However, you must be able to perfectly time your market entries and exits.
This is where your professionalism is put to the test. You must learn and master how to read the market movements. You need to understand when, where, and how to place orders. Also, it is very important to know which order (buy or sell) to place and when to place it, and which crypto to hold or let go. You risk suffering huge losses if you don’t understand the market trends.
A cool hack some people use to battle volatility is to purchase stablecoins. By buying stablecoins or even algorithmic stablecoins, some investors attempt to avoid the volatility issue. Stablecoins should be less volatile because they are anchored to established currencies like the US dollar (USD). That decreased volatility is measured against other digital currencies rather than traditional investments.
Potential Downsides of Cryptocurrency Investment
The truth is that every asset class has drawbacks that may make investing in them riskier than you would ever think of or prefer. This does not only happen with crypto. It is kinda like a general rule of life. Almost everything that comes with advantages also has its downsides. Below are some of the potential downsides of crypto investment.
1. Volatility
Talking from experience, I know that the volatility of cryptocurrencies appeals to certain people. Some people take pleasure in the volatility of crypto because they’re able to leverage it to harness as much profit as possible. But for many, the risk of extreme volatility is too great to comprehend.
Volatility makes it challenging to forecast price increases and decreases. It could be challenging to endure long-term volatility that could eventually lead to gains if a price consistently increases and then drops dramatically.
In 2021, for instance, Bitcoin saw some volatility after Elon Musk published his opinions about digital currency. When Musk later declared Tesla will stop accepting Bitcoin as payment, the value of the cryptocurrency plummeted.
Although the business has since resumed accepting this method of payment, the drop in value at the time of Elon Musk’s announcement would have had an impact on many crypto users and holders. This is because the initial announcement caused many other cryptocurrencies, including Bitcoin, to plunge in value.
2. Unregulated
For investors, volatility could have both positive and negative effects, and the decentralized structure of cryptocurrencies might have its impact because decentralized systems are unregulated systems.
Unregulated asset classes are riskier to invest in because market participants, traders, and observers may try to take advantage of the absence of control. However, this is not true when investing in stocks and bonds, which are markets that are heavily regulated.
These restrictions give these markets a safer environment for wealth accumulation while giving investors peace of mind that they won’t lose money to fraud. Although cryptocurrencies are not a deception or fraud, there is a sort of confusion due to the lack of regulation that traditional assets do not have.
For this reason, it is important to Choose a platform that is FCA registered, offers the chance to trade in more than 150 cryptocurrencies, and has more than 100,000 registered users if you want to give yourself some peace of mind.
3. Fraud/Online hack
The crypto world is a very big space for many forms of financial activities including theft.Cyber hackers could target any kind of cryptocurrency exchange or asset. Cybercriminals usually attempt to attack weaknesses because of their nature and technology in comparison to other asset classes.
While it could be difficult to hack cryptocurrencies, fraudsters are frequently quite intelligent and motivated to trick users. For instance, hackers attacked the Poly Network, a platform where cryptocurrency owners may swap e-currencies, in August 2021 and were able to take $600 million worth of bitcoin.
What was perhaps most concerning was that, because cryptocurrencies are decentralized, there wasn’t much Poly Network could do. This is one of the many dangers involved in crypto.
4. Asset exchange
The development of cryptocurrencies was done separately from one another. As a result, even with the quick development of platforms like Binance, it might be difficult to swap one cryptocurrency for another.
Because the transactions sometimes required to change one currency for another are frequently inefficient, this could make it a less desirable asset class. Nevertheless, there are platforms where cryptocurrency owners could trade their tokens and coins for those of other users. However, it is not always as simple as it will be to trade traditional currencies or sell stocks.
Final Thoughts – Investment Opportunities and Market Trends
In all, I believe that crypto is not dead. Whether or not you like it, the things happening in the realm of cryptocurrencies are constantly evolving and will continue to do so.
Some of the most talked-about cryptocurrencies on the market right now are all worth investing in as long as you have a good understanding of the market trends and proper risk management.
These coins have tremendous growth potential. You could even profit early from the growth and expansion of these excellent projects by investing in the presales.
Anyone looking to join in on the cryptocurrency activity, it would be wise to invest in these cryptocurrencies at a time when they are in tier early stages because the market is continuously shifting and prices could increase anytime.
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