Are you interested in investing in cryptocurrencies? Here are some pros and cons

The cryptocurrency has been in the spotlight since its inception in 2009 with the creation of the Bitcoin blockchain. The term cryptocurrency has become a global phenomenon and is also gaining popularity in India, with India ranking second in terms of cryptocurrency adoption according to the 2021 Global Crypto Adoption Index. Additionally, there are about 15-20 million cryptocurrency investors in India with The total holding was about 400 billion rupees ($5.37 billion). Now, there must be some sort of positive behind these staggering numbers. Let’s look at some of the main advantages of investing in cryptocurrency:

Transfer fees

The transaction costs of cryptocurrencies are very low compared to various financial services. Cryptocurrency transactions are cheaper. In fact, a wire transfer in banks can cost much more than a cryptocurrency transaction. However, this comes with a caveat that the demand for the blockchain can increase the cost of transactions.

Transparency and security

Cryptocurrencies mainly rely on the encryption and security of the blockchain and the distributed network of computers to verify transactions, which improves security. So, unless and until someone gains access to the private key of your crypto wallet, they will not be able to sign transactions or access funds. The majority of hacking incidents involve the hacking of exchanges and also due to individual errors.

Ease of Transactions

One of the main advantages of cryptocurrencies is the ease of transaction, which has also led to a high demand. By simply using a simple smartphone app, hardware wallet, or exchange wallet, anyone can send and receive a variety of cryptocurrencies. In fact, some types of cryptocurrencies, including Bitcoin, Litecoin and Ethereum, can be purchased with cash at a Bitcoin ATM.

Risk diversification / portfolio diversification

Diversification is a must when it comes to asset creation and cryptocurrency is one of the asset classes that offers investors diversification from traditional financial assets. However, investing in cryptocurrencies also comes with risks due to the notable volatility in this asset class. We have seen that investors who have the perfect combination of these two asset classes should generate regular returns.

Increase in acceptance

Over the past few years, there has been an increase in cryptocurrencies as well as the level of investor acceptance. The fundamental utility/value of these cryptocurrencies is one of the main investment criteria. For example, NFTs, or non-fungible tokens, have recently gained popularity and are secured by the Ethereum network. These facilities entice investors and act as a buyout offer. However, not all cryptocurrencies are the same, as some cryptocurrencies do not offer any benefit, rather they just suffice with the culture of Internet memes.

Conclusion

There are additional advantages/benefits to cryptocurrencies as well. There are also obvious and noticeable downsides – volatility in the first place, and therefore investors should do their careful research before investing. If you invest wisely, you can definitely build a very strong portfolio.

(Sidharth Jaiswal is the founder of Sportzchain, a blockchain-based fan sharing platform)

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Published on: Sunday, May 8, 2022 at 07:00 Indochina Time

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