Investing in cryptocurrencies is perhaps the most profitable business if correctly done. As everything has a negative side, cryptocurrencies also are not devoid of risks associated with it. Therefore, cryptocurrencies also demand a good amount of market and risk analysis before any investment is made. The risks associated with cryptocurrencies involve regulatory risks, cybersecurity risks, trading and volatility risks, the threat from substitutes entering the crypto market, etc. There is a principle in business, “no risk no gain”; this applies to crypto investments as well. Investing in cryptos yield high returns that applies, that there is huge risk inherent with it, that cannot be ignored. However, if done correctly, it is the most lucrative investment.
Although the fever pitch of December 2017, has diminished the crypto prices, there are still mixed opinions on whether the cryptocurrency craze is just a bubble, or whether it is a wise decision to invest in cryptocurrencies. As such, if stats are to be believed, it shows that cryptocurrencies are even more stable than stocks. Investing in Bitcoin yields more returns than investing in shares in even the world’s largest banks. As such, Bitcoin is called “digital gold,” proving its effectiveness to be a protective financial asset. It stands ahead of gold according to various parameters like censorship resistance, portability, divisibility, verifiability, and fiat currencies.
This article puts light on some of the reasons why cryptocurrency investments are still considered the most profitable ones despite the fluctuations in their prices since December 2017.
It is a free market
Cryptocurrencies operate in free-market exchanges that abides by a very little or no regulations at all, yielding more profits to the investors. However, operating in a free market has risks that can be avoided by proper research and planning before investing in cryptos. The unregulated market can pose serious threats from manipulators who can go to any extent to play inside trading games, spoofing, wash trading, pumps, and dumps, etc. However, the absence of circuit breakers benefits the starters to freeze trading when prices go haywire. Also, it provides a cool-down period during major sell-offs, for traditional markets.
The main advantage here lies in the fact that when the market crashes, the cryptos set themselves right, without affecting the other players. This, in turn, leads to greater volatility, where the traders can take advantage of price inefficiencies.
Quick arbitrage and settlement
The delay in the settlement that exists in buying and selling stocks does not happen in the case of cryptocurrency investment. This is because of the decentralized blockchain technology that guides the entire process of investments in cryptocurrencies.
Non-dependency on high-end computers
Large investment banks are compelled to spend a hefty amount on high-end supercomputers to gain a competitive edge over other market players. These computers are programmed to run high-frequency algorithms to trade in just a few microseconds. These pose huge barriers to trade, which is absent in the case of crypto trading and investment. Moreover, crypto trading does not require to spend huge money on installing these high-end technologies, which are probably, why it is considered as the most lucrative business in today’s world.
However, before jumping into any confusion, it is of utmost importance to consider the following things before entering the crypto market for investing or trading.
Do proper research
Among the 1690 cryptocurrencies existing in the market, it is very confusing to select the preferable one. Bitcoin is the very first cryptocurrency launched in 2009, has the greatest number of users. Others in the line are Ethereum, Dash, Ripple, Bitcoin Cash, so on and so forth. Before purchasing any cryptocurrency, do thorough research by seeking for reputable news outlets and the whitepapers of the crypto coins. The reputable ones will always outline what they hope to achieve with the technology, as well as how the currency can potentially grow. Avoid anonymous commenters who claim in support of a coin saying that this will reach Bitcoin’s fame shortly.
Hold on a stop loss strategy
A stop-loss strategy helps in minimizing the loss in case the market falters. It is the extent of loss that you are capable of incurring in case the trade crashes. Therefore, cryptocurrency investments can yield high returns if done correctly.