Why Cryptocurrency Is Not A Good Investment

Cryptocurrency may exist a good investment if you are willing to take information technology is a high risk gamble which could pay off – but also that there is a potent chance yous could lose all of your money.

Prices of cryptocurrencies including bitcoin have surged spectacularly in the by but they have plunged in 2022, and so it is important that if y’all are planning to invest in them, y’all go in with your eyes open up.

In this commodity we explain:

  • Is it a adept thought to invest in cyptocurrency?
  • The risks involved in investing in cryptocurrency
  • Is cryptocurrency a good style to brand money?
  • Is cryptocurrency a skillful long-term investment?
  • If Ethereum is a skillful culling to bitcoin
  • Whether bitcoin is a good inflation hedge

Related content: Should you invest in bitcoin?

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Is it a good idea to invest in cryptocurrency?

If you lot invest in
cryptocurrency, practise it based on the facts, non the hype – and in that location is a lot of hype.

Before you purchase and sell digital currency, know the risks so you can judge if investing in information technology is a good thought for yous and your personal finances. Here, we help yous understand how cryptocurrency works.

The Bank of England would not agree that information technology is a good investment. Governor Andrew Bailey warned that people who invest should exist prepared to lose all of their savings.

What are the risks of investing in cryptocurrency?

Governments and financial regulators in almost every country have warned investors of the risks posed by buying cryptocurrency.

And that the warnings have been then emphatic and widespread is partly down to the hype around digital currencies.

When an investment makes headlines for soaraway returns, is featured in advertisements or endorsed by celebrities as a way to go rich, investors tin pile in without thinking through the possible consequences.

1. Volatility

Extreme volatility is a defining factor of cryptocurrency. While you lot may make high returns, you could also lose everything.

Read the experiences of one Times Money mentor reader: “Buying bitcoin instead of spending on nights out has made me $16,600”.

ii. Scams

In Nov 2021, around £one millionworth of cryptocurrency scams were being reported to Santander UK by its customers each month. The scale of crypto fraud overall will be much greater.

One of the nearly mutual types is when a criminal hacks into your computer and freezes you out of your account.

3. Exaggerated promises of loftier returns

Cryptocurrency firms may also be overstating how much investors could receive from investing in crypto, while minimising the risks.

4. No compensation scheme

In the UK, people holding money with firms regulated by the Financial Conduct Potency (FCA) are protected past the Financial Services Compensation Scheme; if, say, a depository financial institution or building society goes bust, compensation of upward to £85,000 volition be available to customers through the FSCS.

Most crypto assets, however, are not regulated by the FCA, and so if the cryptocurrency exchange or platform where you lot take invested goes bust, at that place is no guarantee you will get your money back.

For those wanting to become to grips with crypto investing, check out our article: Six cryptocurrency tips (and five mistakes to avoid).

“Some firms are offering investments in crypto assets that promise loftier returns. If consumers make up one’s mind to invest, they should exist prepared to lose all their money.”

Financial Conduct Authority, In January 2021

Is cryptocurrency a good way to make money?

Early investors in cryptocurrencies such as bitcoin will probably accept made money. If you had spent £310 to purchase one bitcoin in Apr 2016, half dozen years later your investment would have been worth about £24,000.

Bitcoin’south price soared through 2021, reaching tape highs of $69,000 in November. But the toll of bitcoin has been falling in 2022 among a wider cryptocurrency sell-off equally investors steer articulate or riskier investments at a time of rising aggrandizement and interest rates.

The price of a single bitcoin fell beneath $20,000 (£17,250) in June 2022 and has been loitering around that level since then (as of early September 2022).

While that £17,250 value for one bitcoin is fashion more than than its price of £310 in April 2016, the price fluctuations for even the near popular cryptocurrency highlight the extreme volatility of crypto investment.

Some new cryptocurrencies are intended to supplant traditional currencies such as pounds or dollars. Others are used to create new types of financial application, or swap value between various digital currencies.

If you are considering ownership into digital avails, await closely at projects individually to run into how they might pan out in the futurity.

Are you buying a totally worthless digital coin or something that offers innovative solutions to existing financial problems? If you lot are new to digital assets, read our article on cryptocurrency trading for beginners.

What are average returns for cryptocurrencies?

There is no guarantee a cryptocurrency will remain in activeness in the long run.

For example, of the superlative ten cryptocurrencies by market place value in 2013, only vii are still performance today.

In 2013, one bitcoin was worth just nether $112, and the currency had a total market value – all the bitcoins in circulation multiplied by the cost of each one – of only over $1.2bn.

On sixteen May 2022, 1 bitcoin was worth about $xxx,000 and had a total market value of $1.3 trillion.

Eight years ago, one litecoin was worth $iii.38. In April 2021, it commanded a value of about $245 per money. Now it is worth nearly $60.

Devcoin, novacoin and CHNCoin are no longer listed by the price-tracking website CoinMarketCap, while freicoin and terracoin take fallen in value and the latter is worth a fraction what it was in 2013.

And then while the standard communication for investors in any asset is to keep their money where it is for at to the lowest degree five years to ride out market downturns and benefit from the good times – as some bitcoin investors have done – buying smaller coins and property onto them as a long-term investment.

There is a abiding stream of new cryptocurrencies entering the marketplace. Dogecoin is just one recent example: information technology took off in May 2021 but has struggled to sustain investor momentum.

Is ethereum a proficient investment?

If the price of any nugget rises rapidly, at that place is always a chance it could fall just every bit quickly. We have seen that with ethereum in 2022.

A correction is usually defined by an asset dropping by more than x%. That can be a skilful buying opportunity for an investor.

Launched in 2015, it had been on a steep upwards trajectory since July 2021, reaching a record high of $four,617. In late January 2022, its toll had fallen to $2,411, and equally of early September its value was virtually $one,570.

Bear in heed withal that almost two years ago it was effectually $122. It is still one of the most pop cryptocurrencies largely because it has more uses across just being a cryptocurrency.

Ethereum is used in smart contracts on the blockchain networks crucial to cryptocurrencies, and payments company Visa recently said it would use information technology to tape crypto payments.

When you look at the history of bitcoin, it reached the £10,000 mark later virtually iv years, and then ethereum could follow a like trajectory given its popularity.

Only recollect there are no guarantees, and then don’t put all your eggs in one basket. Check out our guide to bitcoin alternatives here.


An important indicate to comport in mind well-nigh investing is that you only lose money if you sell when the nugget falls below the price you paid for it, as y’all terminate up crystallising your losses.
Read more than in our beginner’s guide to investing.

Can cryptocurrency exist a good long-term investment?

Yep, according to sophisticated investors such as banks, hedge funds and pension funds.

More of them are investing in cryptocurrency than ever before, and investment banking giant JP Morgan Chase advised in Feb 2021 that investors could consider putting 1% of their investments into bitcoin as a manner to diversify their portfolio.

Even so, this investment advice is aimed at fiscal professionals and not your boilerplate investor who owns a few thousand pounds in stocks and shares.

Investing in crypto that is not particularly well known or well supported is fraught with serious adventure.

Some early investors who have persisted have evidently made themselves rich. Those who oasis’t? Well, it should exist fairly clear that the value of their investments has fallen to next to nothing.

Almost serious investors in cryptocurrency will non consider putting their money into projects that are not already well known.

Top tip:

  • Sentry what sophisticated investors are buying. Alimony funds or university endowments, which manage billions of pounds in cash and specialise in long-term investments, will often just invest in bitcoin — if they invest in crypto at all.

Bitcoin is the original cryptocurrency and commands a loftier long-term value considering it has never been hacked and has maintained 100% uptime since it was launched.

Is bitcoin a good aggrandizement hedge?

Investment pros have been talking a lot most digital currency as a fashion for investors to hedge confronting inflation.

When aggrandizement rises, equally it is doing at the moment, the value of your cash falls. As the years pass, we can buy fewer goods and services with the money in our banking concern accounts.

Investment options touted as a “hedge” — government bonds or golden, for example — tend to either:

  • Keep more of their value than cash over the long term
  • Or they tend not to be affected by declines in other parts of the economy

The get-go of these potential advantages could also exist applied to the stock markets – and, history suggests, to crypto assets such as bitcoin. That’due south why and so much long-term investment advice is focused on moving cash out of our banking concern accounts and into stocks and shares that could appreciate over time.

Broiled into the bitcoin code is the promise that no more than than 21 million units of bitcoin will ever exist created. So instead of beingness an inflationary currency like sterling or dollars, some experts debate bitcoin is the contrary: it is deflationary, increasing in value with the passing of time.

Of form, the deflationary argument in favour of bitcoin falls down if governments determine to regulate specifically against it. India, for example, has proposed a ban on cryptocurrency trading, suggesting information technology volition impose fines on anyone caught belongings onto digital assets of whatever kind.

The regulatory uncertainty that surrounds bitcoin, and cryptocurrency in general, is one of the reasons so many investors disbelieve it entirely.

Is cryptocurrency a adept investment? Checklist

  • Cryptocurrency investors should exercise their due diligence, every bit they would with any other investment
  • Remember long and difficult about which cryptocurrency has the genuine potential to alter the earth
  • Try not to exist swayed past malicious coin-grabbers shouting this or that coin is “going to the moon”
  • Remember there is zilch quite like losing a month’s wages in a mean solar day to bring an investor right back downward to world


Should I invest in bitcoin?

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Source: https://www.thetimes.co.uk/money-mentor/article/cryptocurrency-good-investment/

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