Cryptocurrency: A Good Investment?

Cryptocurrency continues to enthrall investor interest and raise questions of security. Savvy investors are making money off the crypto boom, but many more are losing everything.

Additionally, crypto presents opportunities for criminal activity. The U.S. Secret Service confiscated more than $102 million in cryptocurrency assets since 2015, and the agency has 254 active investigations in this period alone.

While the efforts of government agencies help build trust in the crypto market, you cannot deny the continued risks of the market. Crypto is not backed by tangible materials, making the digital asset unstable. Despite the risks, investors still want to know if crypto is worth a look.

Discussing the Safety of Cryptocurrency

To an amateur investor, cryptocurrency is a lucrative investment. You cannot deny the profitability of the market and specific currencies, like Bitcoin. However, while youthful investors see dollar signs, seasoned strategists see caution signs.

Crypto is not a sound or safe investment. The industry might have staying power, but competition, vulnerabilities, volatilities, and future regulations, make the market questionable at best. People who made the most of the uneasy market held on for the highs and lows. In some cases, investors got lucky. Still, the number of investor losses makes up a great deal more than the wins.

Crypto Risks 

Many crypto organizations speak of the safety of blockchain, the core of the crypto market. However, while blockchain is somewhat secure, the exchanges are not. Several exchanges have experienced historic hacks, resulting in investors losing money. The inherent risks of hacking have led to the creation of insurance and protections for investors, but is that enough?

Additionally, storing your digital assets is not so easy. Several exchanges garner trust among investors, but they require assets remain in the exchange. The idea of leaving cryptocurrency on an exchange with the risk of hacking is questionable.

Also, as crypto is not a federally supported currency, it is not granted the same protections as other investments. The FDIC will not protect crypto investors against potential losses from:

  • Hacking 
  • Theft 
  • Exchange closures or bankruptcies  

To protect an investment, some investors turn to cold storage. Cold storage includes devices like hardware wallets. Unfortunately, storing currency off exchanges comes with other risks, primarily lost keys or wallets. Without a key, an investor cannot access their wallet, and without the wallet, the investment is gone. There are stories of crypto investors losing millions after losing their key or wallet.

Is Crypto Still Worth It? 

Cryptocurrency is a risky but potentially lucrative investment. The market does not abide by the same regulations as other traditional markets, which is not ideal. Additionally, the market's volatility can have investors losing or gaining profits in a short period.

For most investors, the risks are not worth the potential reward. However, if you believe in the future of crypto, the risks might be worth the potential reward. Before investing, do your homework. You should have a sound reason for choosing the currency you choose.

As a traditional investor, the risks of crypto are too great, especially as a primary investment. However, it can offer some benefits as a small piece of a diversified portfolio. Still, the market is unpredictable and volatile. Before you invest, develop a sound strategy to protect against potential losses.