The Benefits of Investing in Crypto, and the Risks you Have to be Aware of

Investing in cryptocurrencies is no longer an activity reserved for a select few. Everyone can include crypto in their portfolio these days, and many have already started on this path, given the numerous benefits that these digital assets provide. Chances are you know at least one person who has traded or is currently trading cryptocurrencies, either as a full-time profession or a side hustle. Some are more skilled at crypto trading than others, but one thing’s for sure – crypto investing has become an extremely appealing activity lately.

Cryptocurrencies have had a short but tumultuous history so far, with plenty of ups and downs, but they’ve been on an ascending trend since their inception. The crypto market was estimated at over 1 billion USD in 2021 and is projected to come close to the 3 billion USD mark by the end of 2028, so it’s no wonder crypto investments have also risen considerably in recent years.

Cryptos have built up a massive following over the course of time. According to statistics, almost 100 million people from all across the world are now investing in cryptos, and their number keeps increasing. And let’s not forget the big-name companies like Microsoft, Tesla, Twitter and PayPal that are also active in the crypto investment space.

This should give you plenty of reasons to start your own crypto investing journey, but if you’re still on the fence about it and want to learn more about the benefits you can get out of it – as well as the risks to watch out for – this article will provide the guidance you require.

Potential for high rewards

One of the most important benefits of crypto investing, and probably the main reason why so many people jump on the bandwagon, is the possibility of earning high rewards. People judge investment opportunities by their ability to yield returns, and cryptos score pretty high on this scale, especially as a short-term investment. All cryptocurrencies go through recurring phases of rise and decline, so if you invest in the right crypto at the right time, you can get large profits out of it.

However, you shouldn’t disregard long-term crypto investments either. Although they’re less likely to produce high earnings, using crypto as a store of value is also a smart option for those who want to circumvent risks and protect their portfolio.

Continuous growth and appreciation

If you take a look at crypto prices from a few years back and compare them to the current values, you’ll notice there’s a staggering difference between these figures. Cryptos have come a long way since their humble beginnings, and their value has increased steadily over time, even though most people didn’t give them much chance of survival.

The biggest cryptos on the market, like Bitcoin or Ethereum, have more than doubled or tripled their worth in a relatively short period, proving all the skeptics wrong. The way that the Bitcoin price USD has evolved over time is a prime example of crypto appreciation, and many other coins have followed a similar trend. This goes to show that legitimate crypto projects can not only hold their value in time but also continue to grow at incredible rates, and that can help investors make big money.

Transparency

Cryptocurrencies are underpinned by blockchain technology. This means that each crypto transaction is permanently recorded into a digital public ledger (the blockchain) in order to ensure legitimacy and traceability. It’s next to impossible for anyone to alter the data blocks stored on a crypto network due to the numerous nodes that verify and validate each transaction.

No other class of assets can provide a similar level of transparency. This is a major point of concern for investors as higher transparency leads to safer transactions and fosters trust and confidence.

Security

As an investor, you want to make sure your assets are safe and protected at all times. Luckily, cryptocurrencies use cryptographic techniques to secure transactions, verify transfers and ensure safe additions of new data blocks onto the blockchain. That makes cryptos incredibly secure as it’s almost impossible for anyone to tamper with the data that is stored on the blockchain network or steal your coins unless they can gain access to your private keys.

Accessibility

Unlike the stock market or other traditional asset classes that have very strict trading schedules, the crypto market never sleeps. This means you can buy or sell cryptos at every hour of the day and night and make a move whenever you feel the time is right. There are also no limits to how many crypto units you can transfer at a time, so it all depends on how many funds you want to invest and your personal trading strategy.

On the flip side…

All the benefits listed above have created a lot of hype around crypto investing, but unfortunately, there are also downsides to take into consideration. First of all, if you want to become successful at trading cryptos, you have to understand the ins and outs of the concept, which is quite complex, so there’s a steep learning curve ahead of you.

Secondly, the high volatility of the crypto market means there’s no possibility of accurately predicting how prices are going to evolve in the future. While price swings can lead to high returns, they also expose investors to the risk of big losses. One uninspired decision can make you lose all your funds. That’s why it’s generally recommended to keep your crypto investments at or under 5% of the total value of your portfolio.

Investing in crypto can be an extremely lucrative endeavour, but only if you practice caution and do your due diligence. The risks that come with crypto trading are not to be ignored, so before you start your journey in this space, make sure you are properly informed and always work on expanding your knowledge in the field.