Bitcoin was trading at $4,000 this time last year, do you know what it is at right now? $33,000. However, just last month it was around $70,000 so a case that can be made about its massive returns can be countered by the narrative that crypto is extremely volatile. So for a person who is evaluating the risk versus the reward of crypto it becomes really hard to understand what to do.
Risks of Crypto
In order to understand the question, let’s look at the risks of crypto. The biggest risk of crypto is its volatility, the risk that makes it a very lucrative investment also makes it a bad investment as well. There are other risks as well, that include hacks, scams and data breaches of exchanges that were a lot common in the past, however, now they are under control.
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The biggest risk looming over crypto which might tumble down the whole bridge is the crypto banning or extra tight regulation. The volatility of the market makes it very easy for the price of crypto to tumble a lot, with minor changes in the ecosystem. So if news breaks that crypto has been banned by some country it just pushes the price down by a lot. So in a few scenarios crypto is an extremely risky investment.
Crypto’s Reward
Cryptocurrency market cap is around $1.5 trillion right now. Just a year and a half ago it was less than $500 billion, and just 10 years ago it wasn’t even a billion dollars. The industry has progressed so much in such less time that it is the stuff of legends. There have been multiple crypto millionaire’s and billionaire’s to come out of crypto in a very short time.
The crypto market had outperformed the stock exchange year over year with insane returns never before seen in any financial institution. Short term and long term crypto has made astronomical returns for its investors.
The age old question, is it safe?
Well it really depends upon how you define safety. If you define safe as some investment in which you won’t lose money with 100% assurity, then no it is not safe. Or if you define security as something that will get you minimum loss, then no crypto is not a safe investment. However, if by security you mean long term returns are more than your investment, then yes crypto is a safe investment.
It really depends upon you, and your personal choice. If you want to take a bigger risk for a bigger reward, crypto is for you, it is the best investment you can make on a risk adjusted basis right now. It has a lot of potential, provided that you invest in coins with strong fundamentals and don’t rely on coins that have no backing and are pumped up by some rich investors.
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