Pros & Cons of Cryptocurrency

Cryptocurrencies seem to be conquering one market after the other. Recently, we witnessed the first-ever chess event titled FTX Crypto Cup, where the main prize was $60,000 and the equivalent of 0.6 Bitcoin. It is only one example of many crypto-friendly events that are happening all around the world.

Among the most significant advantages of cryptocurrency are 24/7 accessibility, anonymity, and the potential for high returns. On the other hand, digital currencies are difficult to understand for beginners. They are also susceptible to frequent value changes and are not as widely accepted as fiat currencies.

If you are still new to the crypto market, you may be unsure whether it is worth investing in it or not. We want to help you get rid of your uncertainty. In this article, we list the pros and cons of cryptocurrency. Read on to find out if cryptocurrencies are your cup of tea.

Pros of Cryptocurrency

Cryptocurrency markets are often associated with a number of risks. Although there are companies that accept cryptocurrencies, and you can even find free Bitcoin slots, your options are still relatively limited. However, several advantages of cryptocurrency can help you make up your mind.

Anonymity

You don’t need to provide your personal information when making a transaction with cryptocurrencies. In addition to that, you also remain anonymous if you choose not to share your identity with other users or buyers while conducting a transaction. All this has made cryptocurrencies very popular among people who want their transactions to stay anonymous. The lack of identity disclosure also makes it easier for people from countries with oppressive governments to protect their own security.

High Returns on Investments

Due to the high volatility of digital currencies, they tend to gain a lot of popularity among traders and investors who are looking for potential high profits. Unlike traditional investments like gold or stocks, cryptocurrencies have the potential to yield much higher returns on investments over a short period of time. For instance, during the first half of 2017, Bitcoin was worth almost 20 times more than it was at the beginning of the year and reached a price of nearly $3,000 at one point. Of course, this doesn’t mean that you will earn thousands of dollars right away with cryptocurrency investments. But if you have some spare cash that you want to invest in something with potential for growth, it is worth considering putting part of your money into digital currencies.

Cons of Cryptocurrency

Besides being difficult to understand for newbies and susceptible to value changes, cryptocurrencies also lack support from governments around the world, which makes them easily influenced by external factors like regulations and bans imposed by governments. On top of that, they also lack support from merchants who prefer to stick to traditional currencies as they have been doing so for years already. Some banks also still refuse to accept any form of digital currency payments in fear that cryptocurrencies could bring them losses due to their volatility and anonymity features.

Difficulty in Understanding Cryptocurrencies

One of the biggest drawbacks of cryptocurrencies is their complexity and difficulty in understanding them for beginners. Most people prefer traditional currency to digital money due to the latter’s complex nature and risk-of-loss factor. It is not uncommon for people to ignore digital currencies completely as they find them confusing and too risky for investment purposes.

Volatility Risk

Another big problem with cryptocurrency markets is their high volatility risk. Due to frequent price fluctuations and value changes, many people lose their money when investing in digital currencies due to panic selling or not being able to predict future changes correctly. As we have mentioned previously, crypto trading can potentially be very profitable, but at the same time, if you aren’t lucky, you could end up losing more money than, e.g., in the case of forex.

Lack of Support from Merchants and Banks

Cryptocurrencies are not widely accepted by merchants and banks, so you can’t make payments as easily with them as you would with fiat currencies. While there is a growing number of merchants who support digital currencies, we cannot expect them to completely replace traditional money in the near future. In addition to that, most of the banks refuse to accept cryptocurrency payments for fear of losing their money on price fluctuations and anonymity features of cryptocurrencies.

Conclusion

Overall, we can conclude that cryptocurrencies have a lot of potential but should be approached with caution and considered only as an investment option after you have done your homework about them. Don’t forget to read some reviews and information about the cryptocurrency you want to invest in before putting your money into it. The same applies if you are planning to make a larger investment. It is always recommended to invest in something you understand and know well enough.

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