Cryptocurrencies have more than likely been in the media spotlight a lot over past weeks due to their drop in value. This is a reflection of the amount of publicity they got when the Bitcoin value went through the roof.
For many people, this recent drop could fill them full of panic about cryptocurrencies and including them in their investment portfolio. It is for this reason many people are asking if they should consider adding them as an investment.
To make the decision a little more relaxed, it is better to see the advantages and disadvantages before making a decision. First up,
A quick introduction of what cryptocurrencies are.
Cryptocurrencies in a Nutshell
These digital currencies are electronic cash transaction systems. Any payment which is received or sent is made through a peer-to-peer exchange between parties. These payments have no one controlling them, so they are what is known as decentralized.
All of the transaction calculations and recording is carried out by a network of individual computers. Once verified it is placed in the block-chain and can never be altered or deleted.
Cryptocurrency Portfolio Advantages
There are significant advantages to you having a cryptocurrency investment as part of your portfolio.
Potential of Altcoins
Regulation and centralization have been problematic for any transactions, especially when they are made across borders. These digital currencies are decentralized and will have no control from banks and governments.
Over time more cash payments will be made digitally compared to hard cash, and this will include everyday small purchases. Any cryptocurrency which offers this capability has real potential.
As cryptocurrencies are decentralized, they are not tied to any government, country or economy.
They are independent of any of these influences so theoretically they are more valuable than any other form of diversification asset, and shouldn’t fluctuate in value based on any of your other portfolio’s assets.
Although there have been exchanges which have been hacked, and these have affected the price of cryptocurrencies.
The technology of cryptocurrencies and of the blockchains are highly secure. Hackers continually look for loopholes, although none have been found in the basic foundations of any cryptocurrency. On top of this, the chances of fraud and simple theft of cash are all but eliminated.
With any form of financial transaction, there are downsides which can’t and shouldn’t be ignored. Even investments in your portfolio which are linked to the stock exchange all face some problems in some areas.
Cryptocurrencies have sparked imagination, and there are thousands of altcoins which are vying to make a name for themselves.
Any coin you choose must have a lot of homework done on it before committing. A wrong decision isn’t the crypto’s fault.
Everyone talks about the cryptocurrency bubble. Prices rise and fall due to many individuals FOMO actions. Finding coins which are stable and at present under the radar of the mainstream are the best bet compared to choosing current market leaders.
The technology is still new. Banks, governments, and any lawmakers are unsure how to tackle something of this scale.
There is no doubt, cryptocurrencies of one form or another, no matter what anyone does, one or several cryptocurrencies will be around and used in everyday life. The SEC wants to govern ICO (initial coin offerings) which can be a good thing if the company behind the coin is unscrupulous.
Are Cryptocurrencies Worth the Risk?
This is the biggest question any investor can ask themselves. It is also the only question they can answer without anyone else helping make the decision.
If you are more concerned with long-term gains and security, your portfolio might not be able to accommodate any cryptocurrency investment.
On the other hand, if you know of the technology and understand which benefits specific coins can bring, there is the potential for significant short-term gains.
Cryptocurrencies should not be disregarded point blank. If you choose the right one, they can be a great way of increasing value in your other assets.
A cryptocurrency can be used to generate other wealth in the short term which can then be diversified into other tangible investments.
For any long-term investment, finding the right cryptocurrency to hang on to can take more consideration and a lot of foresight that it offers enough to weather the current ups and downs cryptocurrencies are faced with.
Anytime soon, these crypto’s are not going anywhere, it is finding the best one to fit your portfolio which is the hardest part.