Is Cryptocurrency a Good Investment For You?

[Fecoms]

There are many factors to consider when investing in cryptocurrencies. These include high risk, volatility, and liquidity. This post on Trendri will outline these factors. To answer the question, you should have some basic knowledge about how cryptocurrency works. Read on to find out if cryptocurrency is a good investment for you. Also, learn about the regulation of this industry. If you feel comfortable experimenting with cryptocurrencies, you may want to do so.

Five Factors to consider before you invest in Cryptocurrency​

• High risk​

Cryptocurrency is a volatile form of investment that can offer high returns, but it is also incredibly risky. While it is not recommended for people who have little or no experience to invest in it, those who do have experience in other forms of investing should give it a try. After all, it is like the internet, which was initially a risky venture before gaining widespread acceptance. Some experts are even predicting that cryptos will soon become money of the future.

If you are considering making an investment in crypto, make sure that you have other financial goals in mind before you invest. In addition to your investment goal, consider how you can protect your tokens from hackers. A hacker can break into your wallet or even your entire cryptocurrency exchange. To minimize the risk of hackers, store your cryptocurrency in a secure location and practice good digital security habits. The first step in preventing crypto theft is ensuring that you have an emergency fund that covers at least three to six months of your expenses.​

1. One potential risk is the decentralized nature of cryptocurrency transactions. In traditional financial transactions, an entity has a physical presence and a trusted financial institution. However, with cryptocurrency, there is no trusted third party. This makes it difficult for investors to identify a rogue exchange and assess the risk accordingly. Therefore, there is a high risk when investing in cryptocurrency. If you have a large amount of money, you may want to start with smaller investments. If you have enough money, you could build a substantial portfolio in a relatively short time.​
2. Second major risk when investing in cryptocurrency is the lack of regulatory frameworks. Without proper regulation, cryptocurrencies are more vulnerable to price manipulation. Furthermore, investors worry about the future potential for government restrictions that could affect the value of the currencies and even ban them altogether. Cryptocurrency regulations are also disorganized and haphazard. Investors should be wary of scams and fake endorsements. However, investors should know that this type of investment is very risky and should only be undertaken by experienced investors.​

• Volatility​

The volatility of cryptocurrency as an investment is a big question mark in the crypto space, and the answer isn't as simple as "it depends." It's a new concept that takes time to adjust to its new price discovery process. In other words, the volatility of a cryptocurrency may be higher than that of a stock, but it will be lower in the long run. Moreover, investors should not focus on short-term price swings, as the volatility of a crypto investment is largely irrelevant to the long-term success of the project.

In addition, it is important to keep in mind that volatility is a normal part of market activity. This is because it presents opportunities for profit, such as when a stock's price goes up. A healthy level of volatility is where the price remains stable within a broad range. Conversely, extreme volatility is when the price changes wildly in a short period of time. This level of volatility is a good sign, as it offers investors the opportunity to buy at a low price and profit from the sudden price spikes.

To make cryptocurrency volatility more predictable, Brenner and Galai developed an index, the VCRIX, as an econometric benchmark. This index, like other volatility indices, is based on an HAI (heterogeneous autoregressive) model. Furthermore, unlike other implied volatility indices, the VCRIX is indexed to the value of 1,000 at the time of the study. As of 2020-02-10, the VCRIX was re-indexed to a basis of 100.​

• Liquidity​

The level of liquidity in the cryptocurrency market is important for determining trading strategies and portfolio allocations. The following paper presents a methodology for estimating the level of liquidity. It uses data from the Bitfinex, Coinbase Pro, and Bitstamp electronic central limit order books. This methodology collects transaction data on order book snapshots and trade indicator, which shows the buyer and seller initiated transactions. The authors collect the data at one-hour frequency and estimate the daily liquidity of a given cryptocurrency.

The liquidity of a cryptocurrency is often measured by its 24-hour trading volume. Some indicators measure this volume in terms of the number of transactions per day. While the 24-hour trading volume is the most commonly used measure, the indicators may also be applied to weekly or monthly intervals. Currently, Bitcoin is the leading cryptocurrency and has a market value of over 203 billion dollars and a 24 hour trading volume of over 13 billion dollars. The capitalization and market value of a cryptocurrency are important factors in estimating its liquidity.

Another important metric to look for in determining the liquidity of a cryptocurrency is the 24 hour trading volume. If a coin has more trading volume than it can support, then it is considered liquid. Its price may fall, but this is because buyers and sellers are not interested in trading it in that particular time. This means that when you sell a cryptocurrency, the price may drop dramatically. If the volume is low, the liquidity will be low.

The market's liquidity is influenced by how efficient the system is. A highly inefficient market will make transactions more difficult. Traders need access to global exchanges to trade their coins. Furthermore, an illiquid market makes it difficult to make the right decisions, and this is especially problematic for cryptocurrency traders. But there are ways to increase liquidity in the cryptocurrency market. If more people buy and sell, it makes it easier for everyone to make a profit.​

• Regulation​

Despite the widespread use of cryptocurrency, governments are still not on board with the technology. The state bank of Pakistan recently issued a circular warning banks not to facilitate the transactions of virtual currencies. In a court proceeding, however, the state bank clarified that the circular was not a ban on cryptocurrencies, but rather a warning to avoid their unregulated use. The Securities and Exchange Commission of Pakistan also recently published a position paper regarding the regulation of cryptocurrency.

Although the SEC has a role in crypto regulation, there are still many lingering questions. It has yet to be fully determined whether cryptocurrency regulation will lead to a more trustworthy regulatory environment. Like any other asset, cryptocurrencies pose risks. The potential for fraud, money laundering, and price volatility are amplified by their absence of a central authority. However, despite the current state of cryptocurrency markets, traditional banks remain a reputable asset class.

Moreover, the HKMA has yet to draft an effective regulatory framework for cryptocurrencies. The draft has been drafted in consultation with various financial regulators in South Africa. In addition, the FSCA has released a draft declaration defining crypto-assets as a financial product, which will require crypto asset service providers to seek authorisation as a financial service provider. Ultimately, these regulations are aimed at ensuring that financial products are targeted at the right category of investors.

The lack of clarity in the United States has stifled the growth of cryptocurrency. Many entrepreneurs and investors have remained cautious and are unable to venture into cryptocurrency because they fear being prosecuted for violating the law. The lack of clarity has hampered innovation and hurt the commonweal. Further, the overlapping oversight of various agencies has caused a structural barrier to change and inflated the costs for cryptocurrency creators. This is why regulation is so important.​

• Investing options​

While there are many forms of cryptocurrency investing, one type stands out for its high volatility. In the event of a severe market downturn, your entire investment could lose value. Therefore, investors who can't handle market fluctuations should steer clear of cryptocurrency. The good news is that the government of India has reversed this ban. Here are some investing options for cryptocurrency:

You can purchase cryptocurrencies in fiat currencies like the U.S. dollar. This means that first-time buyers will probably have to use regular money to buy cryptocurrency. However, experienced investors may be interested in trading existing crypto holdings for another type. To help them decide between these two investing options, consider contacting your financial advisor. He or she will likely be able to provide you with valuable insights regarding the cryptocurrency market. The best way to choose a cryptocurrency investment depends on your goals and the level of experience and knowledge of the investor.

Another option is to invest in a cryptocurrency mutual fund. These funds will likely contain the top five to twenty most popular cryptocurrencies based on market capitalization and liquidity. Diversification will reduce the volatility and increase the Sharpe Ratio of the portfolio. These funds will have fees of between 1% and 2 percent of assets. However, these funds have higher fees than other types of cryptocurrency investment. A good alternative to crypto mutual funds is to construct your exposure yourself.

While Bitcoin is the most popular cryptocurrency, there are many others you should research as well. Cardano, for instance, uses a proof-of-stake system to verify blocks. Its transaction fees are lower than those of Ethereum, but it has a hard cap on its supply. If this is not addressed, supply may be constrained in the future, driving its price upwards. These are important factors to consider when choosing a cryptocurrency to invest in.​

 

[Lens1000]

The points that you have carefully spelled out are very good to know before delving into cryptocurrency investment. Majorly, the volatility has the good and the bad side. The volatility rate of the cryptocurrency is directly proportional to the risk-reward ratio. The high volatility makes cryptocurrency a very profitable investment, while the volatility also makes it a very risky investment. This means that you could lose all your fund in cryptocurrency investment in the blink of an eye. Before taking a position in the cryptocurrency trading, it is very important to take into cognizance the risk to reward ratio of such trade.

Moreso, the regulations of the cryptocurrency is necessary to curb the excessive use of the cryptocurrencies. The use of the cryptocurrencies to carryout illicit activities could only be stopped by regulatory scrutiny. Many have made lots of versions of the cryptocurrency regulations. Some critics of the regulation explained that the regulations strictly mean that the government will be on full control of the cryptocurrencies making it a government-controlled digital currencies. On the other hand, some financial investors are very skeptical of the the cryptocurrency investment because it is not regulated. It will make these sets of investors have confidence on crypto investment.

 

[sincerem]

I read from the beginning to the end, you added class in putting down the points explicitly when it comes to risks involved when investing in cryptocurrencies. Risks like volatility, regulatory issues, hacks etc,are problems around cryptocurrencies. Many are still afraid to go into crypto currency investment due to all this lingerings. You talked about investing what you can afford to lose within a given period of time, what you said there is perfectly explained. Most people fall victim of investing much around crypto due to their background of knowledge, they were misinformed, making them to lose money they didn't expect to lose, due to the coin they opted for, dipped in. As beginners, their should be need to learn the basics of investing in crypto, your article is a clear indication of that. Their is no need of investing into crypto currency ignorantly. The volatility is there, when a coin falls too easily in a dramatic way, it takes some time to build up just as we're experiencing at the moment. Bitcoin once reached $70,000 in price, but currently around $42,000+, it will take some time to hit back $70k in the future. Not everyone has such patience to wait for the coin to go back to it's benchmark price and above. That's why many are losing money, which has led them branding crypto scam. But it isn't, because they failed to study the volatility, know the basics before investing.

 

[Jez Pelio]

This really a long and worthy article to read. I know little about cryptocurrency with this information I will be gelded.

 

[eldavis]

Crypto currency is a great investment depending on the crypto coin you are investing into. One major problem most people have with investing in crypto currency is the fact that they are not willing to wait. In some cases holding a particular crypto coin could take weeks ,months and even years. Not everyone has the patience.

 

[moneyteam]

Cryptocurrency is a risky investment. The value of cryptocurrencies can fluctuate wildly, and investors may lose all of their invested capital. However, cryptocurrency also has the potential to generate high returns. Some believe that cryptocurrency will eventually become a mainstream asset class, and could even replace traditional fiat currencies such as the US dollar. Investors should only invest what they are willing to lose, and should consult with a financial advisor before investing.

 

[Flow-er]

The question tha you throw out is very easy to answer. The person to answer the questions Will have to look inwards and get some facts straight before answering it. I will do myself a favour by looking at the risk that the cryptocurrency investment presents on the table. If the risk is worth taking, or it doesn't worth what one will put money on will all be answered differently by different people based on the knowledge that they have on cryptocurrency investment. The level of the knowledge with you have gotten in cryptocurrency market evaluation will go long way to determining if the crypto business is for you or not. For someone with a very good understanding of the cryptocurrency market, he will choose the investment because he knows the way to boycott or reduce the risk that is involved in its trading position. On the other hand, for someone with absolutely no knowledge around the crypto investment, he will not go with it because of the high risk and its high volatility. He will prefer to put his money on business that he has its basic knowledge . This is why I mentioned that the question will be answered differently by different people.

 

[Mika]

In my opinion and experience, cryptocurrency investment is good for everyone, provided you are in a country where it is legal. Here are my reasons why crypto investment is good.
You can start investing with a small amount: You have $10, can you invest this money in the stock market, in the real estate market, in the mutual funds, or in bonds and security of deposits? The answer is no. Can you invest $10 in cryptocurrency and still make profits? The answer is yes.
Market risk can be minimized: Let's imagine you have invested $100 in the share market, when the price starts going down, how do you minimize the risk? The only way to stop losing more money is to panic sell. But in the process, you will lose money. However, when the crypto price starts going down, you can exchange your crypto for stable coins and avoid losing your money. You can exchange stable coins with the crypto of your choice once the market starts improving. By doing this you might even earn more profit because you can buy when the market goes too deep.
Earn staking rewards: You can stake your cryptos and earn rewards. Can you do the same with share investment?

 

[Franchise Solomon]

From what you have said, I think investors should buy into the stable coin idea in order to minimise risk and save themselves from penury. Also, I believe so many investor don't really have confidence in cryptocurrency because it is not regulated and no one to go to if anything negative happens. So therefore, they panic whenever there is a fall in value and are in a haste to at least retrieve their capital or whatever is still remaining before the whole thing crashes like Ponzi schemes.

 

[Good-Guy]

Cryptocurrency trading is certainly one of the riskiest investments I have ever seen. I have also tried to trade in the cryptocurrency trading platforms and I must say that I made many mistakes and due to those mistakes, I lost a huge amount of money. When it comes to cryptocurrency trading, the key is the risk management strategy. You must know that cryptocurrency trading is very risky and this is why you must create a strategy that could help you to eliminate the risk or at least minimize the risk.

Some traders even use stop loss feature, they analyze the prospects of the market and analyze the current conditions of the market and only then they place a trading order. this is what many professional traders do. professional traders have the ability to analyze the chart and then predict the price of the cryptocurrencies and this analysis is called "Technical Analysis' in the field of trading.

Cryptocurrency trading is NOT like gambling money. It is all about trying to analyze the situation of the market and create the investment strategy accordingly. This is what many expert traders do. of course, even many expert trader also suffer from losses. But in the end they gain more as compared to what they lose.

 

[blessingc]

Cryptocurrency is a very nice and lucrative business in the world today. It does not need your PhD or school cert to participate in this space. The lame man can be involved in this investment, due to the ability to invest little or more capital which increases overtime, depending on the kind of crypto you are investing in, such as meme tokens and stable coins, though most of those coins are long term investments. If one is patient, he will benefit massively.


Cryptocurrency is also classified into different types, such as decentralized finance (DEFI), utility tokens, NFTs.


NFTs are not fungible tokens, it is a crypto platform that gives people the opportunity to trade digital art such as audio tapes, pictures, and videos and wonderful art works. They have the buyers and the sellers involved. The Byers have the opportunity to purchase minted products as crypto which may increase in value over time, and as well sell to get profit.


Cryptocurrency has been a very good means of getting money for people who are interested and conversant with it. Though it seems to be a risky business, it is very profitable when you understand the ins and out and when you know the kind of coin you are investing in.

 

[Ithedicious]

Thank you for this eye-opening write-up. Personally I am not getting into the crypto space for now to a point of investing , even though I have been receiving most of my payments in cryptocurrency .

I just believe this is not just the right time for me to start and I still have to consider so many things before making an attempt to invest so I don't make the wrong decision .

Since cryptocurrency is extremely volatile, I just have to learn and understand so many things about its liquidity, future potential to be on the save side before I can make an attempt to trade or invest .

I consider cryptocurrency to be something to invest since the possibility of your asset increasing in value is very high even with the high liquidity.

I will definitely invest in cryptocurrency . But before I engage in cryptocurrency I have to make sure I really understand what cryptocurrency is all about and how I can be able to invest wisely to avoid losing.

And for now I don't really have the money to invest , so I still have to work to raise up some money to start up my invest on my favourite coin .

 

[Jafar Safari]

Well explained. With the increase in the hype around digital payments, this may be the best time for you to broaden your investment fields and dive into the crypto market. You have to choose the right crypto for investment. Few examples like bitcoin, ether and bhax.

 

[Sotherefore]

I don't really have any problem with cryptocurrency , in fact cryptocurrency is among one of the best investment for me. The reason why I like cryptocurrency is not because I have made a lot of profit with cryptocurrency , no but I am just considering the future potential of cryptocurrency.

I believe maybe in the future more people will adopt investment in cryptocurrency and that will really pushed the price of cryptocurrency to a very high price making early investors likely to make a lot of money. For now I have not really benefited from cryptocurrency as most people will be thinking because cryptocurrency has drop in value and all my little investment is down and as a result of this I can't withdraw.

What I have come to understand about cryptocurrency is that you shouldn't really consider to invest the money you will need urgently in cryptocurrency because the volatility of cryptocurrency can actually bring down the value of your asset to a relatively low price and sometimes it could takes a long time for you to recover it back.

It is rather advisable for you to just invest the money you won't likely need urgently , that's what I understand.

 

[Jasmine]

Since the question is targeted towards personal opinion, I will share my opinion on whether crypto is a good investment for me. I have some digital assets but I do not consider myself an investor. I have some fractions of Bitcoin and Ethereum, few AXS and a lot of SAND and ADA (when I say a lot I don't mean to say thousands). I don't have expert level knowledge on crypto but I know how to read the market and when to buy which coins. My Bitcoin and Etherum investment is at loss because I bought last November (you might understand, I bought during the bullish period), however, my other crypto investment is profitable because I bought when the price was down. I am planning to hold my assets for along time, therefore, I do not worry much about the current bearish market. When investing on crypt, my decision depends on various factors. I bought ETH and BTC because these re the most reputable crypto coins, however, I bought AXS and SAND for different purpose. These are meta verse tokens and metaaverse is taking the world by a storm, and I saw the potential in these coins. I plan to buy more SAND in the coming days.

 

[Limivorous]

Whether or not crypto is your cup of tea to try, here are a few points to help you out -

1. Time - analysing crypto requires a lot of time. You have to invest a lot of time to look into the market, find the trends, analyse the current causes that can affect the market, and make a good entry-exit point. Can you invest such an amount of time every day?
2. Goal - What is your purpose for investing in crypto? Is it just because it is a new trend right now and everyone is investing in it, or is it because you are genuinely interested?
3. Capital - You need to have a decent amount of trading capital to begin with.
4. Dedication and consistency - needless to say, these 2 are very important.

 

[Yugocean]

I keep major part of my assets in stablecoins which helps me to keep in my asset target during market crash , but whatever I have in risky crypto, I divide it onto two.
1) No panic sale, it is for investment, and I invest it in locked staking.
2) Panic sale, I sell it and keep stablecoin. I am leaving this second part because due to it I lost some rise later.

I also keep a reserve fund (like in paying sites) which I use in "buy the dip", Till there is my target, I keep it.

 

[Hooligan]

I started investing in cryptocurrency when the prices were low, so I could buy more coins. Now that the prices are high, I am able to sell my coins and make a lot of money out of them.
The most important thing in cryptocurrency investment is to know the right time for buying and selling which many lack.

 

[Yugocean]

Right now my entire investment is ruined. Still, I am not ready for panic sale, because what has fallen will rise again. Lest I sell my asset now and after that the price starts rising (happened many times before.)

Patiencs is a must in crypto investing. Ready to take the risk. The dip is for buying more.

 

[marthapagehere]

Interesting article. Cryptocurrencies are highly volatile and risk-filled. Before investing in cryptocurrencies, you have to conduct research about the cryptocurrency or the digital asset you are investing in. Work on the previous market rates and other factors like support resistance when you are trading. You can seek financial advice from cryptocurrency consultants to sort out the hassles in your cryptocurrency trading.