Without a second thought, it can be said that cryptocurrency has emerged significantly over the past few years. Not only consumers but a vast number of investors are also looking forward to dipping their toes into this digital world. As of 2022, there are nearly 10,000 different cryptocurrencies which give people several options to choose from.
However, before making the decision to choose any cryptocurrency for investment purposes, it is advisable that you know the ins and outs of this world. That being said, we have made a short guide to ease the life of individuals like you.
Let’s get started.
5 Advantages of Cryptocurrency
Here are the top 5 advantages of investing in cryptocurrency.
1. Incredible Security
Since crypto transactions are based on blockchain technology, these transactions tend to account for secure forms of payment. Hash rate is the primary determining factor of the security of any cryptocurrency. The higher the hash rate, the higher the computing power required to compromise the network.
2. Online Purchases
Even though cryptocurrency has not yet been accepted as a direct payment method by many brands, there are alternate ways to perform online purchases with your crypto wallet. There are reliable websites that allow you to purchase gift cards for many brands using crypto and then redeem them at the respective stores.
3. Inflation Hedge
Mineable cryptocurrencies tend to have a limited supply cap. Many popular cryptocurrencies like Bitcoin and Litecoin happen to serve as good hedges against inflation.
4. Cross-Border Transactions
You may not know it, but crypto doesn’t have any regard for national borders. Making cross-border transactions with crypto is a hassle-free job. Not just that, but you’re also able to save yourself from hefty transaction fees as well.
5. Private Transactions
Since it isn’t necessary to register for an account at any financial institution, you can maintain a level of privacy while performing transactions. The pseudonymous transactions mean that you have your wallet address and identifier on the blockchain but no specific personal information.
5 Disadvantages of Cryptocurrency
Everything has its downsides as well. That being said, let’s look at the 5 disadvantages of cryptocurrency.
1. Cybersecurity Issues
Being digital technology, crypto is open to cybersecurity breaches. This may make it fall into the hands of hackers, hence, causing people financial damage.
2. Price Volatility
It is pretty evident by now that the price of crypto is highly volatile. Today, you might be a millionaire in the world of crypto, but there is a high probability of your luck running out soon as well.
3. Adverse Effects of Mining
In case you’re not aware, mining cryptocurrencies requires a lot of computational power and electricity input. Therefore, the whole process is highly energy-intensive, and it can increase the carbon footprint of any country tremendously.
4. Not Entirely Decentralized
Even though cryptocurrencies are famous for their feature of being decentralized, it is not entirely true. The amount and flow of some currencies in the market are still controlled by their creators and some third-party organizations as well.
5. Regulations
Even if all the problems are dealt with, and the technology is perfected in every way, until it is regulated and adopted by the federal government, there will be an increased risk in investing in this technology.
What Is the Best Cryptocurrency to Invest In?
Crypto has been plunging this year with particularly steep declines as Bitcoin dropped below $26,000 in May. However, at times higher risks come to present an opportunity for greater rewards as well. Hence, here are the top 5 cryptocurrencies that you should consider investing in right now.
- Ethereum
- ApeCoin
- Solana
- Cardano
- Terra (Luna)
What Are the Pros and Cons of Bitcoin?
Created in 2009, Bitcoin happens to be the pioneer of cryptocurrency. In fact, it is the most popular cryptocurrency to exist till-date. However, it tends to have its own set of pros and cons. So, let’s have a look at them.
Pros
- High potential for returns
- Payment fraud protection
- Great liquidity and diversification
- It can help slow down the inflation rate
- Safeguards you against hefty transaction fee
Cons
- Extremely high volatility
- High risk of loss
- Lack of regulatory oversight
- May be involved in black market activity
- Governments hold the power to crack down on it and ban it
What Else Should I Know Before Investing in Cryptocurrency?
Not only is it essential for you to understand the mechanism of exchanging cryptocurrencies, but you should have enough knowledge to do your research before taking any action. Other than that, it is also vital to choose reliable platforms, like Coingate, to avoid scams.
Final Words
Even though there are countless benefits of cryptocurrency, there happen to be potential flaws as well. However, if you’re interested in trading crypto, it would be a wise choice to do your complete research before you get involved in this market.
