Planning To Invest In Cryptocurrencies? Here Are Risks and Opportunities

NDTV Profit Desk

22 Oct 2021, 08:42 AM IST

Cryptocurrencies aren't backed by any financial institution or government; they are unregulated

Over the past few years, the cryptocurrency market has been growing exponentially, drawing several young Indians to explore this new investment option. Crypto prices, especially that of Bitcoin, have exploded time and again, bringing unexpected rewards for investors. However, given the volatility of the digital assets, losses are also part of the package. So, while cryptocurrency exchanges may well be on the upsurge, investing in this market comes with its own share of risks and challenges. You need to tread with caution and we are there to guide you. We have listed a few opportunities and risks related to this market:

Opportunities of investing in cryptocurrencies:

1) Good long-term investment: If you are looking forward to long-term investments, you can trust cryptocurrencies like Bitcoin or Ethereum. In fact, these two were launched with similar objectives to help investors reap benefits in the long run.

2) You own your money: Cryptocurrencies are decentralised and do not require the involvement of the government or any other entity. They give investors a chance to have direct control over their money.

3) Not restricted to borders: Cryptocurrencies are used and accepted globally. They don't have any restrictions in terms of borders. Their value won't differ from country to country.

4) Flexible market hours: Investors can trade in cryptocurrencies any time, as they are available 24/7, unlike the stock markets that have fixed timings.

Risks of investing in cryptocurrencies:

1) Unregulated: Cryptocurrencies aren't backed by any financial institution or government. They are unregulated. As a result, there's no authority to take care of investor safety and interest.

2) Prone to hacking: Cryptocurrency trading happens digitally. It is unregulated and susceptible to hacking. So, if you are planning to invest in cryptocurrencies, be prepared for this possibility.

3) It's new: Although cryptocurrency is attracting a lot of investors, the concept is still new. Not everyone is tech-savvy or understands how the system works. There is still a lot that needs to be known with respect to the workings of cryptocurrencies.

4) Volatility: The crypto market is known to witness high levels of volatility, making it a risky proposition. An investor stands to lose hefty sums of money if the price of a token suddenly drops. The extreme ups and downs can't be handled by many investors.

The world of cryptocurrencies is evolving constantly and is full of opportunities and drawbacks. If you are someone who is looking forward to dealing with cryptocurrencies, be ready to handle all possible outcomes.