The pros and cons of investing in cryptocurrency
Cryptocurrency has been in the limelight since its inception in 2009 with the creation of the Bitcoin blockchain. The term cryptocurrency has become a global phenomenon and it is gaining popularity in India as well, with India being ranked second in terms of cryptocurrency adoption according to the 2021 Global Crypto Adoption Index.
Additionally, there are an estimated 15 to 20 million crypto investors in India with a total holding of approximately Rs 400 billion ($ 5.37 billion). Now, there has to be some sort of positives behind these incredible numbers. Let us look at some of the benefits of investing in crypto.
TRANSACTION COSTS
Cryptocurrency transaction costs are way too low when compared to different financial services. Cryptocurrency transactions are less expensive. In fact, a wire transfer at banks can cost substantially more than the cryptocurrency transaction cost.
Cryptocurrencies are primarily based on cryptography and blockchain security and the distributed network of computers verifying transactions resulting in more security. So, unless someone has the access to the private key of your crypto wallet, they will be unable to sign transactions or access funds. Majority of the incidents related to hacking involve exchanges being hacked and also due to individual errors.
EASE OF TRANSACTIONS
One of the key advantages which cryptocurrency possesses is the ease of transaction. By just using a simple smartphone app, hardware wallet, or exchange wallet, anyone can send and receive a variety of cryptocurrencies. Infact, some types of cryptocurrencies, including Bitcoin, Litecoin, and Ethereum, can be bought with cash at a Bitcoin ATM.
PORTFOLIO DIVERSIFICATION
Diversification is a must when it comes to asset creation and cryptocurrency is one such asset class which offers investors diversification from traditional financial assets. However, investments in cryptocurrency include risks as well given the volatility observe in this asset class. It has been seen that investors having an ideal combination of these two asset classes are expected to generate steady returns.
RISE IN ACCEPTANCE
Over the past few years, there has been a rise in the acceptance level from investors. The underlying utility/value of these cryptocurrencies is one of the key investment criteria. For example, NFTs or non-fungible tokens, have been gaining popularity recently, and they are secured by the Ethereum network. These utilities incentivize the investors and acts as a buying proposition. However, not all cryptocurrencies are the same as there are some crypto which offers no utility and are merely piggyback on internet meme culture.
There are some additional benefits/ advantages as well of crypto. If invested in a wise manner, then you can certainly build a very strong portfolio.