What are cryptocurrencies?
Cryptocurrency is an asset or a new investment class with technology as its backbone, where blockchain technology comes into play. Apart from that, some miners can only mine a limited supply of these coins. Also, as evidenced by Tesla’s recent course, which prohibits the purchase of Bitcoins to purchase automobiles. It has been discovered that these cryptos, particularly Bitcoin (BTC), are a waste of a significant amount of energy in the process of minting. Here the question arises of whether you should trade in cryptocurrency in the coming time?
Investing in cryptocurrencies has become a point of contention in recent weeks. Due to the high amount of volatility exhibited in the virtual coin trading area – the crypto market has experienced numerous rounds of ups and downs in only two weeks. After a significant drop on Sunday, cryptocurrency prices recovered on Tuesday. After plunging nearly 12%, Bitcoin, the world’s most popular cryptocurrency, has recovered.
Another catastrophic bout of volatility struck cryptocurrencies earlier this week. Therefore, causing a dramatic drop in the market capitalization of major virtual currencies. That was because of China’s stance on cryptocurrencies and Elon Musk’s statements about the negative environmental impact of cryptocurrency mining. However, anyone who has invested in cryptocurrency will tell you that wild price swings are common in the crypto world and the trend may continue as prices rise. When Bitcoin, the first virtual coin, was introduced a decade ago, the cryptocurrency industry was practically non-existent. Its worth was $0 when it was first introduced in 2009. Bitcoin’s value reached $1 for the first time only two years later. Then it soared to $1,000 in another two years.
Price Fluctuations in years
It soared to nearly $20,000 in 2017, only to plummet to $3,300 in less than a year. While Bitcoin was achieving all of these milestones, it was also experiencing extreme volatility. For example, in June 2011, the virtual coin soared to $30 before plummeting to $2 by November of the same year.
Similarly, after surpassing $1,000 for the first time in November 2013, Bitcoin has fallen to $350 by April 2014. All these examples show that the crypto market is volatile, not just in the case of Bitcoin but also in all the other “altcoins” that have developed since it.
Is it safe to trade in cryptocurrency?
The reply is complicated since, like values, commodities, and shared reserves. It is still a new resource course that has not, however, gathered widespread acknowledgment. Whether or not it is safe to invest in cryptocurrencies is a hotly disputed topic in the financial world. Many people support decentralized digital money, and an equal number opposing it. The dangers associated with Bitcoin, Ethereum (Ether), or any other cryptocurrency, from a purely financial standpoint, are no different from those involved with other traditional assets.
But the virtual coin market is more volatile. According to analysts, all cryptocurrencies are hazardous assets, and dramatic price swings are usual in the virtual coin trading market. As the investment becomes more widely accepted, this is expected to decrease. However, investors should know that the crypto industry has enormous risks and rewards. Putting it another way, to profit from crypto dealing, you must have a high-risk desire. Investors should keep in mind. However, that bitcoin is a lot more resilient than it appears. Nischal Shetty, CEO of Wazir X, a popular cryptocurrency exchange, has previously stated that the asset has weathered two major global recessions and has been around for more than a decade. According to Shetty, cryptocurrencies, like gold, operate as a hedge to protect fiat currencies and stocks.
At times of Pandemic
This reason is one of the reasons why bitcoin demand exploded during the pandemic’s first wave. Unlike fiat currencies and stocks, cryptocurrencies are less affected by inflation and are an excellent alternative to gold, another popular hedge investment. You should also note that investing in cryptocurrencies is legal in India, and there are no regulations prohibiting people from buying or bartering virtual currency. Exploring the cryptocurrency industry may not be such a bad idea for persons with a high-risk appetite and the patience to stay engaged for a prolonged period. Before investing, people should be sure that they have done their homework. There are obvious dangers that should be taken care of.
Should you invest in cryptocurrency?
Cryptocurrencies, like Bitcoin, have traditionally had little price correlation with the stock market in the United States, so owning some can help diversify your portfolio. If you believe that cryptocurrency use will grow in popularity over time. It’s probably a good idea to invest in some crypto as part of a balanced portfolio. Make sure you have an investment thesis for each cryptocurrency you buy. This will help you understand why the currency will last. If purchasing cryptocurrency appears to be too risky, there are other ways to profit from the boom of cryptocurrencies. You can buy Stocks in firms like Coinbase, Square, and PayPal, or you can invest in a crypto futures exchange
like CME Group. While investing in these companies can be beneficial, it does not offer the same upside as investing directly in cryptocurrencies.
The Future of Cryptocurrency
There are chances that crypto will be on the Nasdaq list. That would give blockchain and its uses as a substitute for traditional currencies even more credibility. Some experts believe that all cryptocurrencies need a validated exchange-traded fund (ETF). Although an ETF would make it easier for consumers to invest in Bitcoin. There must still be a demand for cryptocurrency, which may not automatically generate a fund.