In a little over a decade, cryptocurrencies have gone from being ridiculed to being coveted property. As their popularity grows, more and more people are willing to invest their money in them.
But before you start to actively act, you need to understand the root of these motives.
Investments should always be carried out with an eye to capital growth in the future.
Whenever the price of cryptocurrency is rallying, people start spending a lot more.
– Erik Voorhees
Desire to change the world
This global goal was announced at the dawn of the rise of bitcoin, which was subsequently picked up by other cryptocurrencies. The desire to change the existing financial system and its excesses has led to the popularization of these means of payment as a response to existing problems.
“Well, I think it is working. There may be other currencies like it that may be even better. But in the meantime, there’s a big industry around Bitcoin— People have made fortunes off Bitcoin, some have lost money. It is volatile, but people make money off of volatility too.”
– Richard Branson
And oddly enough, those who came first, believing first in bitcoin, and then in other cryptocurrencies, were able to prove by their own example that the desire to change the world for the better is one of the most useful postulates that should be incorporated into a long-term investment.
Balance of the desired and the possible
Cryptocurrencies have now successfully proven that they can compete with conventional fiat currencies on an equal footing. And even more – they have a number of advantages. For example, cryptocurrencies are weakly subject to inflation. Rather, they are under tremendous deflationary pressures. Other advantages include true independence, as well as the ability to conduct fast, secure and inexpensive transactions.
Blockchain technologies have demonstrated their reliability and gained recognition. They have long left the field of cryptocurrencies and are used in medicine, management processes, law, and production. But that’s not all – the blockchain is constantly being improved, opening up more and more horizons in the use of technology, including for the field of finance.
High level of security
The main risk factor when working with cryptocurrencies is the human factor of the owner himself. In other words, the loss of savings due to their own stupidity. But to forge the cryptographic record that underlies the entire system and change the balance of power in their favor is extremely difficult. Indeed, for this, it is necessary to capture more than 50% of all computing power serving the work of a certain cryptocurrency.
Bitcoin is a good example. Energy support of its financial system is spent on huge computing power, which together consumes more electricity than Argentina!
And only some individual countries can seize control, if they really want it and invest a huge amount of money in this venture. This is already now, and in the near future, even cooperation between them will probably not help.
When investing in cryptocurrency, if you’re lucky, you can increase your own fortune tens of thousands of times. Bitcoin is a textbook example. The one who invested a thousand dollars in it in 2008 and held out until 2021 became a dollar millionaire.
Only scammers can promise such a leap. But unlike them, cryptocurrencies actually provide tremendous asset growth.
“Risk comes from not knowing what you are doing.” – Warren Buffet
The simple repetition of actions behind the crowd can lead to the fact that risky actions or ineffective decisions will be taken. For example, there were cases when cryptocurrency was transferred to the accounts of exchanges (a condition for trading on it), and it disappeared from there due to the unprofessionalism of the administrative staff. Or a more commonplace purchase at the peak of demand, when it may take several years before the price recovers. But money loves silence. Including cryptocurrencies.
Unwillingness to understand the intricacies of the technology used
When making a choice between several cryptocurrencies, one should clearly understand what principle lies at the heart of the technologies they use. Otherwise, your own connivance and unwillingness to get acquainted with all the subtleties can result in losses.
Last carriage effect
This is a special case of following fashion, which many people meet. Hearing many stories about the success and growth of assets, people often hesitate to make an investment, and when they do accept it, it turns out that the excitement has dropped and it will take a long time to wait for the growth in value to make a profit.
Anyone wishing to invest in cryptocurrency should be careful when deciding whether to invest their own funds. Indeed, there are a little more than a dozen really successful cryptocurrencies listed on an international scale. The number of those projects that could not develop is significantly higher – they were closed. Hundreds of others are trying to find their niche, but, at best, only a few will succeed. And then there are strong fluctuations in value. All this literally calls to be careful.
“I see Bitcoin as ultimately becoming a reserve currency for banks, playing much the same role as gold did in the early days of banking. Banks could issue digital cash with greater anonymity and lighter weight, more efficient transactions.”
– Hal Finney