Digital Investments – Pros and Cons of Investing in Cryptocurrency

Savings accounts, foreign currency, life insurance, real estate, and cryptocurrencies are the most popular investment instruments among Russians, according to a study by the World Gold Council.

We decided together with financial experts to examine the advantages and disadvantages of popular investments among Russians. Let’s start with cryptocurrencies.

Today people invest in the most popular cryptocurrencies: Bitcoin, Ethereum, Solana and others.

By the way, Solana uses the least amount of energy for transactions and is currently one of the most environmentally friendly cryptocurrencies. Going to the page of exchange directions, you can see the services that offer the exchange of Solana to usd at the most favorable rate

Pros of cryptocurrency


The advantage of cryptocurrencies is affordability. You can use them at any time, you don’t have to go to the bank and withdraw money, for example.

Cryptocurrencies are volatile, and if you are lucky, they will rise in value. This is also a plus. The only thing is, investing in this instrument should be considered as part of diversifying your savings. Don’t put all your eggs in one basket – don’t invest more than 10-20% of your assets in cryptocurrency.

A key advantage of cryptocurrencies is their high yield compared to other instruments. For example, bitcoin was worth $314 five years ago, less than $19,000 three years ago, and now it’s worth $13,000. “On the plus side, cryptocurrencies have a wide range of product lines, the government’s lack of ability to influence this market and track payments related to cryptocurrencies.

The high volatility of cryptocurrencies can make good money. The influence of a single political factor is quite reduced, and it does not require a lot of capital to make money on them.

Not all cryptocurrencies are equally reliable. Preferably those that are the most common, have more liquidity on exchanges and capitalization. “But we can talk about the reliability of cryptocurrencies so far only conditionally. Despite the huge capitals invested in the crypto market today, it is still in its formative stage and carries significant risks for the investor.

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Disadvantages of cryptocurrencies


Let’s move on to the disadvantages and risks of investing in cryptocurrencies. This instrument attracts the attention of novice investors – people with experience usually prefer less risky assets.

On the Internet, investors are presented with a story about easy and fast earnings, without mentioning significant risks. For example, since the beginning of this year, the leading cryptocurrency, bitcoin, has risen 66.9% against the dollar. Such stories of incredible profits, of course, stupefy the minds of novice investors. Because of this, many choose the cryptocurrency market. However, due to the lack of experience and knowledge in the field of investing, investors will lose the invested funds faster than they will gain. This happens because of the rapid changes in the rate of cryptocurrency. For example, since the end of 2017, bitcoin has fallen by more than 40% against the dollar. Not every investor is prepared to endure such a monstrous drop.

Cryptocurrency does not provide a guaranteed source of income. The main income from cryptocurrency is the exchange rate difference, and it depends only on chance.

Another disadvantage is hacker attacks. Even large exchanges often become victims of hackers and lose customers’ money.

There is also a lot of fraud in this market, where currencies, tokens or investment organizations are deliberately set up for fraudulent purposes in order to take investors’ money out. This applies to exchanges, management organizations and exchanges alike, making investing risky not only at the stage of managing one’s capital, but also at the stage of placing or withdrawing funds.

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Remember the stories about crypto-millionaires who forgot their wallet passwords and cannot use their money. And there are cases when access to millions is lost due to a computer glitch. There is no unified cryptopoly in the world yet, and in case of loss, theft or fraud in cryptocurrencies, one can only hope for a happy outcome, but no more.

How much can I earn from investing in cryptocurrency?


If you look at the dynamics of various cryptocurrencies, you might get the impression that such investments bring hundreds of percent returns. But it should be understood that it is just as easy to lose comparable amounts. Take the example of bitcoin: since the fall of 2018, the main cryptocurrency has fallen four times in price by February 2019. And vice versa: in March of this year, bitcoin was given away for less than $4,000, but now it has fallen threefold in price.

In this niche, you can make high profits by significantly increasing the value of the asset, but no one can guarantee that the chosen coin will rise in value. In fact, profitability is unlimited and depends only on market conditions. Both up and down, unfortunately.

The investment process

Knowing the benefits of investing in cryptocurrencies and deciding which one to invest free money in, it is necessary to consider the process of buying digital money

The traditional way of acquiring cryptocurrencies is an electronic wallet, access to which only the rights holder has, fraudsters will not be able to hack it, even if the service on which it is located, share the data. Transactions with digital currencies can also be carried out on special exchanges, where several wallets for unhindered operations. Wallets on exchanges are regularly hacked, so storing large sums of money is a big risk.

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There are exchanges through which you can re-buy bitcoins for rubles from other users. Services of this type usually have a good rate. Transaction is easy to perform, having a card from Sberbank or any other bank. The whole process is as follows:

  1. The buyer chooses a seller whose account has a certain amount of bitcoins blocked.
  2. The number of the card to which the transfer is made appears.
  3. After the payment is made, the seller confirms receipt of the money, and the bitcoins are transferred to the buyer.

Problems for novice investors


Even a professional cannot predict the rise or fall of new cryptocurrencies, their rate depends more on advertising and all sorts of speculation. With more proven players, such as Ethereum or Bitcoin, the situation is more clear and predictable. But there are a number of other problems related to technical issues. An increase in the number of users will cause transactions to be slower than usual. Payment transactions of small amounts are unprofitable because of the transfer fee charged. This feature of the new currency may significantly weaken its impact on the economic situation in the world, as well as affect the price and quotes.

Nuances and possible problems

As predicted by experts, the value of cryptocurrencies will grow. However, there may be periods of “stagnation,” when positions will not change, or a time of non-critical decline. It is also worth bearing in mind that long-term investments from a year bring the investor great benefit and almost never go bankrupt, while short-term investments will be very unprofitable in the event of a temporary drop in prices.