Should You Invest in Cryptocurrency?

5.0

10 Oct, 2021

8 min read

1286 Views

icon
One of the most difficult things for investors to avoid when it comes to cryptocurrencies is getting caught up in the excitement. Digital currencies have swiftly become an important part of many individual investors' portfolios. Understand its nature better before investing in it.

Introduction

Cryptocurrency has begun being invested in with much pomp and circumstance with young investors, in particular, displaying a keen interest in the virtual currency. Yet there exist a number of factors that ought to be taken into account prior to making the decision to invest in the same. Read on to understand what to consider before investing in cryptocurrency. First, though, it is important to understand what cryptocurrency is.

Defining Cryptocurrency

Cryptocurrency can be defined and understood to be a virtual currency that is secured with the aid of cryptography. This makes it almost impossible to duplicate the currency or double spend it. A large number of cryptocurrencies are reliant on blockchain technology which allows the currency to operate with a range of disparate computers operating under a single network.

What makes cryptocurrency stand out is the fact that most of its forms are not issued by a central authority. Consequently, they are, on a theoretical level, immune to interferences run by the government or any manipulation.

Cryptocurrency Fast Facts

  • In the period between December 2020 and March 2021, women in India are believed to have contributed to a 300 per cent increase in their cryptocurrency investments. 
  • As per information made available on Finders, young people falling between the ages of 18 and 34 constitute for over 40 per cent of the world cryptocurrency users. This is in large part owed to crypto-oriented companies allowing individuals to make investments in cryptocurrency with ease.
  • The same Finders report also made apparent that men were more likely to own cryptocurrency in comparison to women in every country. 
  • Cryptocurrency has been found to be most popular in Asian countries.

After considering these facts, it is important to understand whether or not cryptocurrency is worth safely investing in or not.

 

Examining the Safety Concerns Associated with Cryptocurrency

Cryptocurrency is presently understood to be an investment that brings with it high risks and potentially high rewards. Owing to the speculative nature of cryptocurrency, investments made are prone to more risks in comparison to stocks.

While stocks have showcased growth over long periods of time, cryptocurrency continues to be a relatively new addition to the world of investments and trade. Although it does have the potential to become a mainstream currency and gain significant use within society, there is no guarantee of this happening at the moment.

It is important to note that this doesn’t necessarily imply that cryptocurrency makes for a poor investment choice or that it shouldn’t be bought. If it does come to hold real-life utility it could potentially alter the world, and can prove to generate vast sources of income for those who invested in it at an early stage. That being said, it is of paramount importance to first assess your threshold for risk and the ability to tolerate the same prior to risking purchasing cryptocurrency.

In the case of risk-averse investors who are worried about losing money on the investments they make, cryptocurrency may not be the most viable investment. This is owed to the fact that the cryptocurrency invested in may not succeed over time and if that is the case all the money invested in it could be lost.

In the same vein, cryptocurrency is known to be highly volatile. If you are an investor who knows they would lose sleep if your investments drastically fell in value, cryptocurrency might not be the right investment for you.

On the flip side, if you are an investor who is willing to incur a fair amount of risk in order to potentially earn vast rewards, cryptocurrencies might be the right form of investment for you. Prior to buying cryptocurrency, however, it is important to consider how to invest in it with caution.

Cautiously Investing in Cryptocurrency

Those who seek to invest in cryptocurrency must employ a strategic means of doing so. For starters, it is important to only invest money that can be realistically afforded to be lost. While there are never any guarantees with investments, cryptocurrency is known to carry greater risks than stocks. Owing to this fact it is important to avoid investing more money than you can afford.

Prior to making cryptocurrency investments, it is important to have an emergency fund accessible which is worth three to six months savings. Owing to the volatile nature of cryptocurrency it is possible that the prices of the cryptocurrency you invest in could fall following your investment. In case you incur unforeseen expenses and have to liquidate your investments, you aren’t going to like the idea of selling your cryptocurrency investments when their prices are tanking. When you have squirrelled away a significant amount of your savings you can hold on to your cryptocurrency investments until prices begin to recover.

Concluding Thoughts

It is important to invest wisely and do adequate research prior to investing in a particular cryptocurrency. This is because not all cryptocurrencies are equal and some incur greater risks than others. The great investments are those that continue to grow as time progresses and therefore a long-term outlook ought to be favoured during your hunt for the right cryptocurrency to invest in. Simply put, cryptocurrencies should not be researched with the objective of allowing you to become rich quickly.

Frequently Asked Questions

Q1. Is cryptocurrency a paper currency?
A1. No, cryptocurrency is a virtual or digital currency.

Q2.  Is it common for cryptocurrency to be issued by a central authority?
A2. No, it is not. Almost all cryptocurrencies are known for not being issued by central authorities owing to which they are theoretically immune to manipulation or government interference.

Q3. What is more volatile – stocks or cryptocurrency?
A3. Cryptocurrency is known to be far more volatile than stocks especially as it is far newer.

 

Disclaimer: Angel One Limited does not endorse investment and trade in crypto currencies. This article is only for education and information purposes. Discuss with your investment advisor before making such risky calls.

How would you rate this blog?

Comments (0)

Add Comment

Related Blogs

  • icon

    What is Guerrilla Trading?

    01 Nov, 2021

    7 min read

    READ MORE
  • icon

    Top 5 IPOs of 2021

    01 Feb, 2022

    6 min read

    READ MORE
  • icon

    What Happens to Bitcoin...

    14 Feb, 2022

    6 min read

    READ MORE
  • icon

    How To Use a Moving...

    07 May, 2022

    6 min read

    READ MORE
  • icon

    Income Tax in India -...

    02 Oct, 2021

    7 min read

    READ MORE
  • icon

    The Success Story of Jack...

    22 Oct, 2021

    5 min read

    READ MORE
  • icon

    5 Stocks to Watch Out for...

    05 Jan, 2022

    8 min read

    READ MORE
  • icon

    What is Momentum in Stock Trading?

    26 Jul, 2021

    9 min read

    READ MORE
  • icon

    IRCTC Stock and Share Split

    03 Dec, 2021

    7 min read

    READ MORE
  • icon

    Exploring top Retirement...

    08 Oct, 2021

    7 min read

    READ MORE
  • icon

    Is Google a Good Investment?

    11 Nov, 2021

    8 min read

    READ MORE
  • icon

    Investors Walk Away from...

    27 Oct, 2021

    7 min read

    READ MORE
  • icon

    Success Story of Elon...

    28 Jul, 2021

    9 min read

    READ MORE
  • icon

    Long-Term Investments

    28 Jan, 2022

    7 min read

    READ MORE
  • icon

    Margin Trade Funding (MTF)

    21 Aug, 2021

    8 min read

    READ MORE
  • icon

    Success Story of Jeff...

    27 Jul, 2021

    9 min read

    READ MORE
  • icon

    Blue Chips Fuel Record

    25 Oct, 2021

    6 min read

    READ MORE
  • icon

    IPO Advantages and Disadvantages

    03 Oct, 2021

    7 min read

    READ MORE
  • icon

    Understanding Different...

    09 Mar, 2022

    8 min read

    READ MORE
  • icon

    Paytm IPO

    08 Nov, 2021

    7 min read

    READ MORE
  • icon

    Upcoming IPO in Nov-2021

    08 Nov, 2021

    8 min read

    READ MORE
  • icon

    Top 10 Most Inspirational...

    27 Apr, 2022

    7 min read

    READ MORE
  • icon

    All About Commodity Market In India

    25 Jul, 2021

    12 min read

    READ MORE
  • icon

    10 Ways to Profit in a Bear Market

    30 Nov, 2021

    8 min read

    READ MORE
  • icon

    LIC IPO Details: Should...

    18 Feb, 2022

    6 min read

    READ MORE
  • icon

    Nykaa Success Story -...

    22 Dec, 2021

    8 min read

    READ MORE
  • icon

    Stocks to Watch: NMDC,...

    24 Aug, 2021

    5 min read

    READ MORE
  • icon

    Environmental Impact of...

    09 Nov, 2021

    7 min read

    READ MORE
  • icon

    Futures Options Strategy Guide

    19 Jan, 2022

    8 min read

    READ MORE
  • icon

    Options Trading Explained:...

    01 Oct, 2021

    8 min read

    READ MORE
  • icon

    Indian Railways Share...

    24 Sep, 2021

    7 min read

    READ MORE
  • icon

    Success Story of Vijay Kedia

    21 Oct, 2021

    8 min read

    READ MORE
  • icon

    Understanding Taxation on...

    26 Oct, 2021

    7 min read

    READ MORE
  • icon

    Byju’s IPO Plans

    06 Oct, 2021

    5 min read

    READ MORE
  • icon

    Should you Invest in the...

    30 Aug, 2021

    7 min read

    READ MORE
  • icon

    Lenskart Startup Story:...

    29 Mar, 2022

    6 min read

    READ MORE
  • icon

    Stock Trading Bot

    03 Nov, 2021

    7 min read

    READ MORE
  • icon

    How are Dividends on Stocks Taxed?

    29 Jul, 2021

    8 min read

    READ MORE
  • icon

    LIC Seeks to Appoint CFO

    13 Oct, 2021

    6 min read

    READ MORE
  • icon

    Tax free Interest Income in India

    22 Aug, 2021

    6 min read

    READ MORE
  • icon

    Ashneer Grover Biography -...

    28 Feb, 2022

    5 min read

    READ MORE
  • icon

    What is Cryptocurrency?

    09 Oct, 2021

    7 min read

    READ MORE
  • icon

    Taxation of Permanent...

    02 Dec, 2021

    7 min read

    READ MORE
  • icon

    How Does Bitcoin Mining Work

    21 Jan, 2022

    7 min read

    READ MORE
  • icon

    An Introduction to Trading...

    10 Nov, 2021

    7 min read

    READ MORE
  • icon

    Welfare Loss of Taxation

    28 Oct, 2021

    7 min read

    READ MORE
  • icon

    Commodities Trading: An Overview

    25 Aug, 2021

    9 min read

    READ MORE
  • icon

    Forex Trading: A Beginner's Guide

    27 Aug, 2021

    6 min read

    READ MORE
  • icon

    ​​Sugar Stocks Down as Sensex Falls

    29 Oct, 2021

    7 min read

    READ MORE
  • icon

    Taxation Rules for Bond Investors

    03 Jan, 2022

    4 min read

    READ MORE
  • icon

    Success story – Anil Ambani

    23 Sep, 2021

    6 min read

    READ MORE
  • icon

    Raamdeo Agrawal: How...

    13 Jan, 2022

    10 min read

    READ MORE
  • icon

    Exploring Ed-Tech Giant...

    02 Mar, 2022

    8 min read

    READ MORE
  • icon

    Foreign Investment Funds...

    02 Feb, 2022

    6 min read

    READ MORE
  • icon

    Cryptocurrency Insurance,...

    08 Nov, 2021

    6 min read

    READ MORE
  • icon

    Capital Gains Tax

    23 Mar, 2022

    5 min read

    READ MORE
  • icon

    Double Taxation Hangs On...

    01 Dec, 2021

    8 min read

    READ MORE
  • icon

    Invesco drags Zee to NCLT

    06 Dec, 2021

    8 min read

    READ MORE
  • icon

    Pair Trading Logic

    26 Aug, 2021

    6 min read

    READ MORE
  • icon

    Clean Science, GR...

    23 Aug, 2021

    6 min read

    READ MORE
  • icon

    Taxation in 2022:...

    11 Apr, 2022

    7 min read

    READ MORE
  • icon

    Top 5 eco-friendly cryptocurrencies

    21 Dec, 2021

    9 min read

    READ MORE
  • icon

    SEBI revises risk...

    07 Dec, 2021

    8 min read

    READ MORE
  • icon

    Taxation on Mutual Funds

    04 Oct, 2021

    6 min read

    READ MORE
  • icon

    Gold Bond Investment in India

    07 Oct, 2021

    6 min read

    READ MORE
  • icon

    What are ELSS Funds?

    20 Aug, 2021

    8 min read

    READ MORE
  • icon

    LIC IPO: All we Know So Far

    05 Oct, 2021

    7 min read

    READ MORE

Translate the power of knowledge into action. Open Free* Demat Account

* T&C Apply

Latest Blog

Ready To Trade? Start with

angleone_itrade_img angleone_itrade_img

Subscribe to #SmartSauda Newsletter

Open an account