Should You Use Cryptocurrency As A Long Term Investment?
cryptocurrency
Whilst most traders know that cryptocurrency comes with a high risk that could pay off, there is also the huge chance that you could lose your investment.
In 2022, the price of the cryptocurrency has fallen exponentially amongst a worldwide crash, so it is important that, as with any other investment, you go in with your eyes open.
With the volatility within the crypto market, it has never been more important to distinguish the difference between the ways you can buy and invest in cryptocurrency.
If you do decide to invest in cryptocurrency, then it’s important to do so based on facts and research, as opposed to the hype.
Making big returns from online trading is possible, but to get these returns, you need to know what you are doing and make smart investment decisions.
When it comes to using cryptocurrency as a long-term investment, there are some things you should consider beforehand.
Let’s take a look at whether using cryptocurrency as a long-term investment is a good idea for your financial goals.
Is Cryptocurrency Safe?
Compared to other investments, such as stocks and shares, investing in cryptocurrency, especially if you are interested in using it as a long-term investment strategy, can be considered risky.
While cryptocurrency is considered legal across the UK and Europe, some assets of cryptocurrency trades remain unregulated, leaving them open to vulnerabilities and regularly shifting regulations.
Changing regulations is part of what can lead to crypto markets becoming vulnerable to instability.
With so many governments worldwide weighing in on how to regulate and react to the increase in crypto popularity, there are many different factors that, in the future, can contribute to volatility.
While the market is highly unregulated, security risks are also involved with trading in cryptocurrency. Due to the exponential growth, this has led to a further increase in the number of scams and crypto fraud within the market.
Crypto scams are common, and once you start making trades, you’ll likely begin to receive many messages from other “traders” offering advice or looking to make trades for you.
Try to familiarise yourself with some of the more common crypto scams, and if you believe you have fallen victim to a crypto or broker scam, then there are some ways in which you can look to recover your funds.
Is Cryptocurrency A Good Way To Make Money?
Early investors and adopters of cryptocurrency would likely have seen a high return on investment. For example, if you had invested around £300 to buy Bitcoin in 2016, then this year, that investment could be worth up to £24k.
In 2021, Bitcoin’s price increased and reached record highs of under $67,000, dropping to its lowest price of $29,000 in 2022.
Although that is certainly a lot more than the initial £310 investment, this shows how volatile the market can be.
At a time of rising inflation and investment rates, the price of Bitcoin continues to fall as investors begin to sell off their currencies to steer clear of risky investments.
Even though some of the world’s biggest crypto exchanges are now being listed on stock exchanges, new cryptocurrencies are coming out all the time, making it difficult for investors to know exactly what currency they should invest in.
Some of these new cryptocurrencies are being used to replace traditional currencies such as the pound or dollar.
In contrast, others are being used to create new types of financial applications or to swap value between currencies.
If you are considering investing in cryptocurrency, look closely at the individual projects to see how they may transpire in the future.
Conclusion
There is no guarantee that cryptocurrency will make a return in the long run. Unlike other investment avenues, cryptocurrency is a highly volatile and risky market and, for most investors, offers little in terms of high returns.
Suppose you are interested in long-term investments to make a good return. In that case, you should consider other investment options, such as stocks and shares, or instead use cryptocurrency to create a diverse portfolio.
If you do want to invest in cryptocurrency, then be sure to:
- Do your due diligence, just as you would with any other investment
- Think about the cryptocurrency you want to invest in
- Avoid being swayed by trends or online hear-say
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Category: Cryptocurrency
