The Pros and Cons of Cryptocurrencies: Beginner’s Guide

When cryptocurrencies first emerged, everyone knew of their endless potential to reshape the financial world as we know it. With its complex and somehow different structure, its very existence has somehow opened the eyes of everyone to borderless transactions without any intermediaries.

Several questions, however, remain—what is a cryptocurrency and how does it work? What are the pros and cons of cryptocurrencies? How do we know which cryptocurrency to invest in? 

Let’s dive into it.

Cryptocurrency 101: The Pros and Cons of Cryptocurrencies

The Pros

1. High Rewards

There are more than 20,000 cryptocurrencies on the market today—each digital currency has its own function, utility, and perks. However, there is one common denominator within these cryptocurrencies: their tendency to spike up (and drop), depending on the crypto’s supply and demand. The more a cryptocurrency is used, the higher its price goes.

2. Secure Technology

The major reason why cryptocurrencies rose to fame is their inherently secure infrastructure—blockchain technology. More so, the decentralized nature of cryptocurrencies allows all transactions on the network to be tracked in real-time. 

3. No Intermediaries

Since it lies on a decentralized infrastructure, cryptocurrencies completely eliminate intermediaries in transactions. 

4. Round-the-Clock Trades

Crypto markets are always open—allowing crypto traders to trade anytime, anywhere. More so, coins are being mined and transactions are also recorded around the clock. This is in contrast to traditional trading markets and exchanges like NYSE or NASDAQ. 

Now, let’s go to the Cons.

The Cons

1. High Risks

As a crypto trader, achieving high rewards come with high risks. The volatility of cryptocurrencies, like any form of investment, is risky. This is the reason why investors are advised to invest only what they can afford to lose.

2. Complex Infrastructure

Understanding cryptocurrencies and the technology behind them is a little complicated—it takes time and effort. For this reason, investors should practice DYOR (Do Your Own Research) before investing, to know the ins and outs of their investment.

3. Vulnerability for Newbies

While the security infrastructure of cryptocurrencies is intact, this does not mean it is 100% free from security breaches. There are existing issues in the crypto market like hacking, phishing, and several attempts to gain control over a network. This is something that new and experienced traders should look out for.

4. Long-term Investment Issues

At present, cryptocurrencies have not yet proven themselves as long-term investment. Not quite yet, at least. Stock markets and gold were founded centuries ago—it has a good track history already. The very first cryptocurrency ever released to the public is Bitcoin and that was just in 2008. It really is a risky investment, but still, it comes with high rewards.

Conclusion

Investing in cryptocurrencies requires thorough research and adequate trading knowledge. Before diving into the world of cryptocurrencies, make sure to understand it first—this way, you can maximize its benefits and advantages to grow your portfolio.

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.