Cryptocurrencies such as bitcoin may have been around for a fair few years now, but in investment terms they’re still very much the new kids on the block. It’s natural, then, that there should be some questions about how it all works and whether crypto can really be a safe investment. Unfortunately, there are a lot of misconceptions out there, which can lead to some people avoiding cryptocurrencies without having all of the facts. We’re going to take a look at some of the most areas of concern and separate the facts from the fiction.
The value of your investment
Because bitcoin and other cryptocurrencies aren’t backed by gold or silver, or by a government bank, some people worry that they don’t really have any intrinsic value. But despite being entirely digital modes of currency, cryptocurrencies still have real, tangible value.
Value is defined by scarcity and utility – and it is easy to make the case for cryptocurrencies having both of these qualities in abundance. Cryptocurrencies are seen as being a more secure, more private and potentially more efficient alternative to traditional currencies. This makes them very useful for the people who choose to carry out their digital transactions using crypto. They’re also beginning to be accepted by a wider range of merchants and retailers online. And, because there is a limit on the number of bitcoins that can be produced – 21 million – there should always be a healthy demand. This means that cryptocurrencies can be seen as having real value, despite (in most cases) not being backed by a physical currency.
Scams and security risks
There are also concerns around the potential for cryptocurrency scams, and many people worry that they will be conned out of their money if they decide to purchase cryptocurrency. Unfortunately, there are scammers in all areas of life – and undoubtedly, some con artists will try to take advantage of investors’ interest in crypto. However, the same is true for any area of investment, and is certainly not something that should put you off investment. It just means that you need to do your due diligence – use trusted investment platforms and avoid anybody who’s making claims that are ‘too good to be true’.
The volatility of the market
It’s true that bitcoin has had an extremely volatile history, with the price rising and falling dramatically. This means that it is more suitable as a long-term investment: over time, the value has always gone up. The fact that the market is so volatile can be good or bad, depending on your appetite for risk. People who can’t afford to lose their money, or who expect to make a quick and easy profit, may be disappointed. But any investors who are comfortable seeing the value of their investment fluctuate may be able to make huge returns if the market takes an upswing.
It’s also worth noting that not all cryptocurrencies are as volatile as bitcoin. There are plenty of options available for those who would like to be a little more conservative with their investment. If this is an area of concern for you, then it’s worth doing some research to find out which currencies are the most stable.
Ease of investment
Because cryptocurrencies are surrounded by a lot of jargon and technical terminology, it’s easy to assume that there will be a lot of barriers to entry for the casual investor. In fact, that couldn’t be further from the truth: making your first cryptocurrency investment is as easy as finding a broker to do business with. You’ll be able to buy, sell and store your currencies all at the touch of a button. Take a look at cryptocurrency investment apps such as Bitcoin Prime to see how simple it is to get started. We do also recommend spending some time reading up about cryptocurrencies before you start, to ensure that you have a clear strategy for investment.