NOO !! This was my dad’s reaction when I asked him for money to invest in Cryptocurrency. I remember it was around November 21 when markets were at an all-time high and I still think that dad saved my money (his money) from being exhausted in cryptos. You might be wondering aren’t we here to talk nice things about crypto? YES !! We are but here at CoinMasters we care about our viewer’s money more than anything and will tell you about possible risks and the greater rewards it carries. In this article, we will talk about the main risks involved when investing in Crypto such as volatility, low liquidity, unregulated markets, etc. We will be also looking at the greater rewards it carries such as protection from inflation, easy international transactions, portfolio diversification, etc.
You might be wondering why we are talking about risks first, I have been trading and investing in stock markets for a while and whenever I have a conversation with anyone be it a beginner or expert trader or investor, they are very optimistic in their conversations, but they don’t forget to consider R: R ratio. The R: R stands for RISK: REWARDS, whenever there is a reward to something there is always some risk involved in it so let’s first talk about the risk that crypto possesses.
High Volatility Risk
In simple words, volatility means fluctuation of price. High volatility is high fluctuation which means price tends to move very quickly in any direction, this can be both rewarding as well as riskier but often, as human emotions are not controlled by humans, investors tend to make mistakes in high volatile markets. Small cryptos(with a low quantity in float ) can be easily fluctuated by big investors and institutions and can bring loss to small investors and small crypto holders.
Low Liquidity Risk
Small currencies that don’t have many currencies floating in the market or whose market capitalization is very less can cause the problem of liquidity If it is easy to convert them into cash. High liquidity can easily be turned to cash say gold, for example, can easily be turned into cash but a piece of land may take greater effort and greater time to be turned to cash. Similarly, cryptos with fewer investors and less market capitalization can trap investors easily because no one might be willing to buy them for cash or other liquid assets.
Unregulated Market Risk
Stock markets started in India in the 1850s and because of so much time in the market, it is well regulated and recognized. On the other hand, Crypto Markets are very new. Bitcoin was started in 2009 see approx 150 years and Crypto being new is not that much recognized and regulated.
Hedge against Inflation
Good cryptocurrencies with limited supply are great tools against inflation. Such as Bitcoin has only 21 million currencies in total and out of which 19 million are in supply, a limited quantity, with demand always rising it will result in price increases.
If you have ever made an international transaction you might be knowing how much hassle it is to transact but with cryptocurrencies, it is as simple as it can be. You can use Binance, Coinbase, or any other platform and they will give you various options to buy and sell your cryptocurrencies.
Crypto is cash but digital. It doesn’t require any intermediate authority. They can be transferred through P2P(Person to person) transactions. It doesn’t have transaction fees and is nonreversible nowadays more and more merchants are accepting bitcoin and it will be soon equal to cash transactions but with the ability to do it in any country with anyone and without any hassle.
Cryptocurrencies are a great investment opportunity. It has grown significantly in recent years. Investing in cryptos should be done with caution and with expert advice. My advice for safer investment is to invest only in big cryptocurrencies like Bitcoin or Ethereum.
Cryptos have other benefit too but that we will talk in another blog here only on CoinMasters
Special thanks to @mvaibhav77 for creating this website. Viewers can always visit the website whenever they want to check the latest exchange rates
I will meet you in another blog.