Investing in Cryptocurrencies: Pros and Cons

Access to Bitcoin, Ether, and others is becoming easier. It is easier even for people who are only slightly familiar with the underlying technology.

Pros of investing in cryptocurrencies

Potential of blockchain technology

Cryptocurrencies are a new asset class with potential, especially when it comes to using this technology in other areas. If you look at the past, you can see what price opportunities there are.

In fact, blockchain technology is not only suitable for payments and as a means of storing value. The technology behind digital currencies manages and processes data. Many usage scenarios that are already in use today can be derived from this simple definition. With Blockchain Knowledge Base, even people who are not tech-savvy can invest in crypto.

Natural scarcity of bitcoin and other cryptocurrencies

Is Bitcoin as digital gold? This comparison is often made when it comes to cryptocurrencies in times of crisis. The oldest of all cryptocurrencies is also compared to the precious metal because of its limited availability. Similar to precious metals, which are not endlessly available on the earth, bitcoin is also finite.

Growth market for long-term investors

Investors see the on-chain signals as very positive towards cryptocurrencies in the long term. For example, the number of wallets and the amount of crypto assets held on them is constantly increasing. Cryptocurrencies represent a large growth market for them, from which investors with a long investment horizon, in particular, can benefit.

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Cons of investing in cryptocurrencies

Inexperience investors in the market

The cryptocurrency market is new and disruptive. However, it is also still very young and far from mass adaptation. Experience with the asset class is still sparse. And those who want to invest should ignore the fact that many coins have long since been discontinued.

Many investors ignored the dangers of a purchase. Nobody can really assess the risks, especially not small investors. Even the basics of the technology behind the currencies are difficult to understand. One principle applies to investing. You should only buy investment products that you understand. Only then does an investor know where his money is.

Since there are no real values ​​behind digital currencies, they can disappear from the market at any time or be replaced by other currencies. In such a case, the money invested would be wasted. Investors should keep that in mind.

Bitcoin is not a safe haven

At least in the short term, Bitcoin is not a suitable store of value. Cryptocurrencies do not offer any protection in market phases characterized by uncertainty. They act as a high-risk asset class and are usually abandoned quickly when uncertainties arise. The ‘safe haven’ narrative is and will remain a myth.