Table of Contents
Cryptocurrency has gained popularity in the recent past because of its many advantages. Cryptocurrency comes in many forms namely Bitcoins, Zcash, Monero, Dash, and Ethereum, all of which offer transactions through a virtual platform. Unlike the conventional currency, which requires authentication and documentation, cryptography enables privacy, reliability, and stability in investments. Cryptocurrency is a worthwhile investment, although critics argue in favor of alternative investments. However, cryptocurrency has many benefits despite the disadvantages that may arise. Investors ought to employ strategy when investing in cryptocurrency in order to maximize profit and minimize the risks involved. Although opinions differ on whether cryptocurrency is a worthwhile investment, the benefits of cryptocurrency outweigh the risks when making investment decisions.
Mokhtarian and Lindgren describe cryptocurrency as a digital medium of exchange that employs the cryptographic technology. Through cryptography, people can use Cryptocurrency to exchange various goods and services with the objective of making a profit. Cryptography works to verify and control the market of the cryptocurrency (29). In essence, Williams states that cryptocurrency operates as a virtual or digital currency, unlike the conventional currency that is tangible. Accordingly, people can exchange the currency and conduct unlimited transactions without geographical hindrance (8). The most common forms of cryptocurrency include Bitcoin, Zcash, and Monero. Bitcoin is widely used across the globe because of its many advantages. Although cryptocurrency may have drawbacks, some people prefer the use of Bitcoins, Monero, and Zcash because of the specific benefits that they derive from the virtual currencies.
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Cons
Although Bitcoins and other cryptocurrencies are common across the globe, the use of the currencies comes with some downsides. Bitcoin has a scaling challenge, which makes it a bad investment to merchants. Although many people in America, Europe, and the developed world use Bitcoins, the scaling of the cryptocurrency across the globe faces such challenges as hidden charges. Some countries have economic policies that disallow the use of cryptocurrency as a medium of exchange (Antonopoulos 42). For instance, the Arab world has stringent economic policies that may limit the extent of coverage of Monero, Zcash, and Bitcoin. Besides the reluctance by some sections of the society to fully embrace Bitcoins, the commission fees, such as Bitcoin faucets, make Bitcoins an expensive and risky investment. Accordingly, it is not wise to consider cryptocurrency as a worthwhile investment.
When it comes to the regulation perspective, cryptocurrency suffers more than the conventional currency because of high volatility (Farell 14). Governments impose economic policies on both local and international currencies through foreign exchange levies and trade levies. However, the amorphous nature of such cryptocurrencies as Bitcoins and Moreno increase the risks of their investment, especially on a global scale (Mokhtarian and Lindgren 14). The Arab currencies and some Asian counties prohibit the trade in cryptocurrency, unlike the Western countries that practice free economy. The unbalanced control of cryptocurrency trade increases the risks of an investment in cryptocurrency. Investments ought to thrive in an environment where the risks are perceived and the uncertainties manageable (Moreno 58). However, the level of uncertainty in cryptocurrency investment is unprecedented, which makes it a no-go zone for a cautious investor. Besides, it would be absurd to invest in a trade whose acceptance varies across the globe.
Although investment in Bitcoins and Monero may yield profits, the probability of network stall is high. The network of users may stall regardless of the strategic efforts of the merchants and investors. Unlike the conventional currency whose value depends on the macroeconomic factors, the value of cryptocurrency is independent of the market factors (Williams 56). The strength of the network of users determines the value of the currency and a decline or stall in the number of users may have a significant implication on the value of a given cryptocurrency. The initial coin offering (ICO) remains versatile dependent on how the investors motivate the users to take up Bitcoins or Monero (Burniske and Tatar 87). Subsequently, cryptocurrency is one of the most uncertain forms of investments in the world. The level of profitability depends on factors other than the market forces, which diminishes the investment potential of cryptography.
Pros
Although cryptocurrency has many criticisms, the investment is worthwhile because of its potential benefits to the investors. Cryptocurrency requires risk-taking, just like other forms of investments. Cryptocurrency is a new investment concept, considering that Bitcoin is barely a decade old (Antonopoulos 31). Consequently, cryptocurrency continues to grow at an unprecedented rate, which increases the profit potential of its investors. Economic experts predict that Bitcoin will continue to grow and expand globally, considering its four-fold growth in the past four years. It means that $100 worth of Bitcoins invested four years ago would be worth $400 today. Investors look for opportunities in growing businesses and investments with significant potential (Ruffing and Moreno-Sanchez 238). Cryptocurrency is one of the most promising investments in the world, especially in the virtual world where physical currency does not operate.
Despite the market dynamics that significantly impair the operations of the conventional currency, cryptocurrency is not affected by the volatility of the mainstream market. The domestic currency suffers during economic turmoil and recession, and the related services such as banking and mortgage become untenable (Mokhtarian and Lindgren 16). However, cryptocurrency remains stable even during the global economic crisis. Bitcoin is one of the most stable cryptocurrencies in the world, which is evident in its upward trajectory despite the tough market dynamics. The value of Bitcoin emanates from the fact that they are independent of the market dynamics.
Cryptocurrencies have a higher value than the conventional currency that is prone to fluctuations based on inflation rates, foreign exchange rates, and the tax regime. Bitcoins have the highest value of the cryptocurrencies, and investors can exploit the value to their advantage. Cryptocurrencies bear the unique attributes, unlike silver and gold that fluctuate in value. For instance, Altcoins and Bitcoins are durable, divisible, portable, recognizable, scarce, and fungible (Antonopoulos 33). The reason for the stability is the virtual nature of the currency, which equalizes it to other treasures. For instance, investors can store their wealth in the form of Bitcoin, just as they do to gold. For that reason, it is worthwhile to invest in Bitcoin, especially on a long-term basis.
Although Ethereum and Bitcoin have recorded exemplary performance over the years, Monero has a promising future for investors. Unlike Bitcoin, Dash, Zcash, and Ethereum that offer a virtual platform for the transaction without facilitating synchrony, Monero (XMR) offers many advantages to new investors (Farell 66). Monero is digital, decentralized, and private, just as electronic cash does, which makes it the better option when it comes to cryptocurrency investment. The ring signatures enable privacy when using Monero because it makes it difficult to track the people who transact funds. Investors need privacy to conduct their business harmoniously, especially when handling international transactions.
The investment in cryptocurrency may have risks although such risks may not hinder profitability if investors take the right approach. Investors understand the risks involved in all investments. Although cryptocurrency is a new concept that is quickly gaining popularity, evidence proves that the early investors enjoyed substantial profits (Mokhtarian and Lindgren 23). The negatives of cryptocurrency are insignificant, especially compared to the risks involved in investing in alternative currencies. The U.S. Dollar fluctuates based on the dynamics of the international market. Accordingly, all trade aspects that depend on the Dollar remain unstable for as long as the Dollar is unstable. Accordingly, cryptography is a worthwhile investment that all investor ought to think about, especially in the digital edge when the world has become a global village.
In summary, cryptocurrency is a worthwhile investment, especially in the modern economy when investors diversify their investments. Cryptocurrency comes in various forms, including bitcoins, Zcash, Monero, Dash, and Ethereum. The cryptocurrencies offer different investment options, depending on their scopes and validity. Unlike the conventional currencies that take many forms, cryptocurrency mainly operates through the digital platform, and it differs significantly from the normal currency. Investors can derive many benefits from investing in cryptography. Although acceptability and reliability of cryptocurrency may dissuade some investors, cryptocurrency is gaining popularity, and the trend projects an upward trajectory. Accordingly, investors should not shy away from investing in cryptocurrency. Instead, investors ought to weigh the options and make informed decisions to mitigate the risks and enjoy the potential profits that may accrue from cryptocurrency investments.
- Antonopoulos, Anas M. Mastering Bitcoin. O’Reilly, 2014.
- Burniske, Chris, and Jack Tatar. Crypto Assets: The Innovative Investor’s Guide to Bitcoin and Beyond. McGraw-Hill, 2018.
- Farell, Ryan. “An analysis of the cryptocurrency industry.” (2015).
- Mokhtarian, Edmund, and Alexander Lindgren. “Rise of the Crypto Hedge Fund: Operational Issues and Best Practices for Institutional Cryptocurrency Trading.” (2017).
- Moreno, Elena Christine. “Bitcoin in Argentina: Inflation, Currency Restrictions, and the Rise of Cryptocurrency.” (2016).
- Ruffing, Tim, and Pedro Moreno-Sanchez. “Mixing Confidential Transactions: Comprehensive Transaction Privacy for Bitcoin.” IACR Cryptology ePrint Archive 2017, p. 238.
- Vigna, Paul, and Michael Casey. Cryptocurrency: The Future of Money. Vintage, 2016.
- Williams, Devin. Cryptocurrency Compendium: A Reference for Digital Currencies: A Reference for Digital Currencies. Lulu.com, 2017.