The Pros and Cons of Cryptocurrency

You have a friend who has been raving about the money they’ve made through cryptocurrency, and you wonder if you can do the same. Or maybe you attended a blockchain webinar that has you excited about the possibilities. Eager as you are to get going, you have a few apprehensions that temper your excitement. What if the value of cryptocurrency plummets suddenly, wiping away your life savings in a heartbeat? 

Before jumping into the cryptocurrency market, you may want to slow down and consider the pros and cons of investment. While many people have accumulated great wealth via cryptocurrency, not everyone who wants to play the game will experience the same success. Before getting started, you should think about the following pros and cons of cryptocurrency: 

Pros

• Transparency– With cryptocurrencies, it’s easy to see where your money is going, and you are therefore able to make more sound investment decisions. You can easily track cryptocurrency transactions thanks to the blockchain, which serves like a ledger you can always access.

• Privacy– You can buy and sell bitcoins while remaining completely anonymous. This will be good news to those who are wary of surrendering personal information when using one digital service or the other. Unfortunately, operating anonymously equally appeals to parties dealing in illegal activities, hence the popularity of cryptocurrencies among traders in the dark web. 

• Accessibility– You can access and use your crypto from anywhere you are, so long as you have an Internet connection. And with access to broadband on mobile devices being as prevalent as it is, you don’t need to be seated at a computer to take advantage of fluctuations in crypto values. Transactions involving cryptocurrency also take less time without the need for a trusted third party to verify transactions. 

Cons

• Volatility– Cryptocurrency can be used just like ordinary currency to buy and sell stuff, and it’s a potentially lucrative investment vehicle. You could have bought cryptocurrency simply to wait for it to appreciate and sell at a profit. But like most other investment options, cryptocurrency is subject to unpredictable changes in value determined by market forces. You have no guarantee that the value of your chosen crypto will rise in the near future. There is nothing like guaranteed returns with this form of investment. In the same way, you can make a huge profit; you can suffer substantial losses.

• A Steep Learning Curve– Cryptocurrency has always seemed to be shrouded in mystery, and perhaps that is why it is yet to gain universal acceptance. This is especially true among those who don’t consider themselves tech-savvy. 

• The Lack of Centralized Regulation– The fact that cryptocurrencies are not centrally regulated leaves its users vulnerable. If something goes wrong during a cryptocurrency transaction, you likely won’t have the same legal protection you would have if you paid with fiat money. 

Additional Considerations 

• Taxes– Whether you’re using cryptocurrency as an investment vehicle or simply to buy and sell, the IRS will want to know about it so that they know which taxes apply. Until recently, cryptocurrency taxes were a bit of a grey area, and many people used it as a means of tax evasion. Now, the IRS has a standard means of reporting all your cryptocurrency transactions. This allows the authority to see if you made income from mining and staking or investing in companies that use cryptocurrency. Based on this, a property tax may apply. 

• Risk-Benefit Analysis– Whether you will make money from cryptocurrency will depend on your ability to study trends and know when to buy and when to sell. Buying cryptocurrency is no guarantee that you will make a profit, so it isn’t right for everyone. 

Knowledge is Power

It would be unwise to hop onto the cryptocurrency bandwagon simply because you’ve heard that some people have made money there. As with any other investment, you need to take time and do your homework first. Look at the cryptocurrency options available in detail, paying attention to how they are managed and how they have been trending in the recent past. If you’ve decided to take the leap and give cryptocurrency trading a try, be patient. It takes time, but investing in cryptocurrency might just change your life.