Is Investing In Cryptocurrencies Worth The Risk, Given Heightened Volatility?

There are enough signs in the market that digital currencies will stay even if they don't replace conventional money

Is Investing In Cryptocurrencies Worth The Risk, Given Heightened Volatility?

There's no denying that there is a huge risk that accompanies your investment into any cryptocurrency

The euphoria and excitement around digital currencies have parallels with Netherland's 17th century Tulipmania, a metaphorical reference to an economic bubble. Gabriel Makhlouf, the British economist and European Central Bank governing council member, has even predicted that Bitcoin investors must prepare to “lose all their money”. And while crypto-mania has taken the world, including billionaires and celebrities such as Elon Musk and Snoop dog by storm, it's important to underscore the volatility that accompanies the investment in digital currencies.

Therefore, one question that almost everyone has been asking: "Is it worth the risk?" Let's understand this keeping in mind the following factors.

1. Is cryptocurrency here to stay?

There's no denying that there is a huge risk that accompanies your investment into any cryptocurrency. The prices fluctuate massively, but that doesn't mean a patient and an attentive investor can't make money out of it. So, while it may not be as safe at the moment, efforts are on to make it safer. There are enough signs in the market that digital currencies will stay even if they don't replace conventional money.

2. Infrastructure

Despite all the talk of uncertainty and volatility around crypto tokens, the infrastructure to make them more accessible and enable effective and efficient exchange of currency among users and customers is being built rapidly. The latest is Shiba Inu, the Dogecoin spinoff, which last week, launched ShibaSwap, its own decentralised cryptocurrency exchange.

3. Is it a safe store of value?

One of the best features, perhaps, of any cryptocurrency is that there is no physical form, meaning it can't be printed or seized and therefore it may provide a safe store of value. But at no point should we forget that they remain highly speculative and of course, there's no guarantee that they will become mainstream to such an extent that they replace conventional money.

4. Theft and scams

Crypto scams have become common these days. In fact, a recent report by Federal Trade Commission (FTC), a US consumer protection body, said that scammers impersonating Elon Musk had stolen over Rs. 14.63 crore in digital currencies since October 2020. Additionally, there are many schemes such as doubling tokens tricking users into giving up their currencies. So, beware.

5. Long-term or short-term investment?

Experts say that any potential investor or someone already with their money into crypto tokens should focus on the long game and ignore the short-term swings in value. Besides, if you are really interested in buying crypto tokens, there's nothing better than doing your own research, assessing your financial situation, reading the white papers, and even joining fellow crypto enthusiasts online.