I was never very enthusiastic about Cryptocurrency alias digital or virtual currency. Being a subject expert in corporate taxation, I was not convinced that a parallel currency other than the central currency of a country could prevail. But it has happened….
One of my close friends approached me in the year 2010 and suggested I invest in ‘Bitcoin’. I was one amongst the billions of those people who took ‘Bitcoin’ as merely an adventure. But when I look back after 11 years, I regret not investing in ‘Bitcoin’. I thought tried digital currency in the year 2017 and made a tiny investment to earn few bucks. Nevertheless, my state of mind was similar to that of yours and I was not ready to go heavily into crypto. Even the state of mind of all the Governments worldwide is still the same.
The Federal Governments of almost all nations are not willing to recognize the cryptocurrency. El Salvador is the only nation that has yet given legal authorization to cryptocurrency in their country. But it apparently seems that sooner or later, cryptocurrency will get more legal backing. It is also a possibility that the central banks of various nations come out with their own official digital currency.
Now coming back to our main issue, as an investor a genuine question comes to our mind “Why Cryptocurrency??”. But with my limited knowledge and professional experience, I would rather say “Why NOT cryptocurrency!”
Why Cryptocurrency
Friends, every investment is made with some degree of inherent risk. If you are investing in stocks or currency, there is always a risk of market fluctuation. According to my experience, you will not be able to achieve an average return of more than 8%-10% over a period of time by investing in stocks and that too coupled with risks of corporate insolvency, stock crash, and economic ups & downs.
Moreover, if you are thinking to invest in federal bonds or corporate bonds, though safest of all the investment options, you are surely going to burn your pockets after considering the inflation rates. Investment risk is everywhere whether you invest in bullion, real estate, or crude.
Many experts say that cryptocurrency has high volatility and carries high risk. Agreed at this point… But isn’t it true that ‘Bitcoin’ and other digital currency has given returns to their investors in multiples? Over the last ten years, no investment avenue whether stocks, bonds, real estate, bullion, or crude has matched the returns of digital currency. These facts certainly prompt a general investor to invest in digital currency.
Why not Cryptocurrency!
Before making any debut in the digital currency market, you must be aware of all the negatives associated with digital currency.
Firstly, Cryptocurrency does not carry the legal backing or authorization of any nation. Therefore, if it is banned by the Government, you may run into trouble. However, in the present scenario, this is a distant possibility.
Secondly, Cryptocurrency is not backed by any asset unlike stocks or bonds, and therefore, any gain or loss in crypto prices cannot be associated with any existing asset.
Next, Cryptocurrency is subject to very high volatility. So, the timing of entry is very important and the approach should be cautious. Don’t invest all your money in one go…Invest in tranches and stay for long.
Next, Cryptocurrency is not evidenced by any paper certificate or cover note, or paper bonds. This is one of the major issues which I found in digital currency. You have nothing to prove your ownership of digital currency except a digital wallet where digital currency could be transferred to your control.
In my concluding remarks, I will reiterate “Risk is everywhere”. So, why not take a small part of the risk in cryptocurrency. Shed few bucks out of your savings may be as small as 5 percent of your savings and invest it in tranches on every correction of 10%-15% in crypto prices.
Disclaimer: This article should not be considered as advice to make an investment in Cryptocurrency and is merely for educational purposes. Readers are requested to act diligently before making any investment in Cryptocurrency. Further, readers should also be aware of fishing or fradulent crypto-currencies.
