As with any investment, Bitcoin and other cryptocurrencies often make for high-risk, high-reward choices. As such, it’s important to carefully weigh up the risks against the potential gains before deciding whether to invest your hard-earned savings into crypto.
So, let’s look at both sides of the coin: what are the pros and cons of investing in cryptocurrency?
Pro: Potential for high returns.
The biggest perk to investing in cryptocurrency is the potentially high rate of returns. It’s not uncommon to hear about 50 per cent annual returns or more, even when it comes to smaller coins. This also means that you don’t need to be a millionaire to start investing, but you should only invest what you can afford to lose.
Con: Volatility is higher than in traditional investing methods.
The volatility of cryptocurrencies is well documented, and many people have lost sizeable amounts of their life savings because they chose to funnel it all into crypto. However, the entry of major financial players like PayPal into the digital currency arena has contributed to an upward trend in prices in recent years.
Pro: Cryptocurrencies are global and with no intermediaries
Cryptocurrencies have the same value in every country, so there are no exchange rates. Plus, because all transactions are by digital means, there are no intermediaries – no banks, no agents and therefore, no fees for wire transfers. Better still: because there’s no handholding by banks, transfers are incredibly fast.
Con: It’s not backed by a government or company
While not having intermediaries can be a big pull for some, it can also put you at greater risk of total loss. With other forms of investment, there’s usually some kind of guarantee. For example, fiat currency is backed by a government and stocks are backed by companies. It means that if you get hacked and have your coins stolen, you won’t have anywhere to turn to salvage your lost money. Furthermore, cryptocurrencies cannot be recovered as there is currently no mechanism to do so.
Pro: There are lots of resources and communities to help you learn more
Whether it’s through crypto news sites, online forums, or professional wealth management providers, you’ll always be able to find legitimate guidance on investing wisely.
At Turner Little, we have decades of experience in wealth management. Talk to us if you’d like to understand more about cryptocurrencies or explore other ways in which you can maximise your wealth.