There are a number of pros and cons to trading cryptocurrency. For anyone who is looking to kickstart their investment career but doesn’t have the knowledge or resources needed to do so, cryptocurrencies could provide a viable alternative.
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Pro: Potential Gains
One of the biggest draws for traders is the potential to make enormous profits. Even people who don’t follow cryptocurrency news closely will probably have heard the news stories about people who have managed to become millionaires overnight because of their Bitcoininvestments. There are a couple of famous cases of people buying Bitcoin when it was new and cheap before subsequently losing a hard drive. Those hard drives now contain millions of dollars’ worth of Bitcoin but are lost for good.
It is possible to make very big gains trading cryptocurrencies. Thanks to the dramatic price fluctuations that occur throughout the day, the price of a cryptocurrency can rise significantly in a matter of hours.
Con: Potential Losses
Those dramatic price swings go in both directions. It is just as easy for a cryptocurrency price to nosedive as it is to soar. There is a type of cryptocurrency scam, knowing as a pump and dump, which involves buying and selling huge volumes of cryptocurrency. In doing so, the scammers can cause the prices to rise then fall.
Cryptocurrencies are nowhere near as stable in value as fiat currencies. This instability can lead to much more substantial losses for Forex traders dealing in cryptocurrencies than they would expect from trading fiat.
Pro: Transparency
One of the main selling points of cryptocurrencies over fiat currencies is that the cryptocurrency market is far more transparent than the conventional financial system. Every single trade that is made on a crypto network is recorded and logged. A process called mining is used to ensure the integrity of the network records and verify transactions that occur on it. Thanks to miners, you can be certain that the logs you are looking at for network transactions are accurate and up to date.
Con: Security Breaches
There have been numerous examples of high-profile cryptocurrency exchanges being hacked. There has also been more than one exchange operator who has run off with everyone’s crypto. These risks also exist with traditional investments, but there is a considerably more robust system in place for identifying and investigating them. You should avoid storing your crypto on exchanges and instead aim to transfer it to your account as and when it is needed.
The Final Verdict?
Trading cryptocurrencies isn’t a get-rich-quick scheme. You should be suspicious of anyone trying to sell them to you in these terms. There is undoubtedly money to be made from cryptocurrencies if you make the right decisions. However, you always need to be prepared for your investments to turn bad and to lose your money. Before you make a final decision on whether to try your hand at trading cryptocurrencies, you should first read through a guide for beginners. Make sure you understand what you are getting into and what you hope to get out of it.
Trading in cryptocurrencies is generally considered riskier than trading stocks and shares. However, cryptocurrencies can be a worthwhile investment, as long as you know what you are investing in and why.
