Is Crypto a Good Investment: Don’t tangle your tinsel. Stay tuned as we explore all the downsides of cryptocurrencies. You’ve probably heard about Bitcoin investors winning or losing millions. The million-dollar question: Should you buy cryptocurrency?
Despite what internet trolls say, buying cryptocurrency isn’t a secure investment. During the 2022 crypto meltdown, over 80,000 Bitcoin millionaires who were living lavishly saw their accounts plummet.1 Easy in, easy out, right? That will be explained later. The first step is to define crypto.
What Kind of Investment Is Cryptocurrency?
Cryptocurrencies are used for investments and purchases. You trade money for cryptocurrency coins or tokens. Some popular cryptocurrency names include Bitcoin, Dogecoin, Litecoin, and Ethereum. Crypto comes in thousands of varieties.
Crypto investors aim to benefit by selling crypto at a higher price. Buy low, sell high, and such. Investors may purchase and sell Bitcoin or other cryptocurrencies frequently as prices fluctuate. Or they could stockpile it, hoping it will become a fortune and fulfill all their digital ambitions. Some people made a lot of money investing in crypto in recent years. Bubbles popped, and the crypto market was one. In 2022, Luna and Terra cryptocurrencies crashed. Panic caused a $2 trillion crypto market loss.
Is Crypto a Safe Investment?
Crypto is not a safe investment, if we haven’t convinced you before. You might lose your shirt and pants playing with crypto. Stay away, Big Tuna. Explore open waters. Crypto is hazardous. While some made a lot of money investing in crypto, it was all speculation—a level above gambling.
Risks of Investing in Cryptocurrency
Crypto is risky for many reasons. It’s risky since its price can vary dramatically in an instant. This is called volatility in investment. Volatility hurts investment portfolios. (It’s also bad for politicians, but that’s another story.) Let’s examine crypto investing hazards.
Cryptocurrency is volatile
Crypto is volatile and irritable like a 3-year-old screaming, “I’m not tired!” You never know what you’ll get each day with crypto, which goes up and down. When someone sneezes, the price reduces! While equities fluctuate depending on company performance, crypto fluctuates solely on supposition. Manage market instability, inflation, and your future with a pro.
Inflation, economic fears, and crypto mining restrictions have increased volatility. Stirring everything together makes a horrible chili pot. All investing involves risk. Why go into something so volatile?
Cryptocurrency has an unproven rate of return
No bank or government intermediary trades cryptocurrency online. It’s the digital Wild West with no marshal to enforce the law. Since crypto has minimal rules, its value fluctuates without a clear trend. It’s harder to calculate returns and changes than with growth stock mutual funds. A cryptocurrency long-term investment plan lacks data and confidence. Don’t gamble with your finances.
Cryptocurrency has lots of unknowns
Crypto is as mysterious as its name implies. Imagine: Nobody knows who founded Bitcoin! Only a small fraction of individuals worldwide comprehend the blockchain technology behind cryptocurrency. Your ignorance makes you vulnerable. We usually say that if you can’t explain your investments to a 10-year-old, you shouldn’t invest. You’re inviting chaos.
Despite the popularity of crypto investing, 72% of individuals are still afraid to invest or don’t trust it (68%).3A research found that only 8% of Americans see crypto positively, similar to the number who view The Bachelor franchise positively.
Cryptocurrency makes theft and fraud easier
In the first quarter of 2023, hackers stole $400 million in crypto. Indeed, $400 million! Amazingly, security experts praised the amount because it’s 70% fewer than the first three months of 2022’s thefts. Hackers have successfully executed heists comparable to The Italian Job without the assistance of Marky Mark or a fleet of Mini Coopers. Stealing millions from a typical bank is unfathomable, but crypto thieves do it consistently.
Also Read: Bitcoin Drops Below $68K, Ether Fumbles After ETF Nod
Crypto theft goes beyond hackers. FTX, one of the largest crypto trading platforms, collapsed in November 2022 when its creator, Sam Bankman-Fried, was arrested and charged with fraud for stealing customer funds. Customers lost billions on FTX. Dark characters appear to flock to crypto. We’re not claiming all cryptocurrency users are terrible guys evading the authorities and making dodgy black market dealings. Anyone seeking to commit a crime without detection may find cryptocurrencies appealing.
Cryptocurrency Laws and Adoption
Crypto legislation differs widely by country. Nine nations, including China, ban Bitcoin. El Salvador and the Central African Republic officially approved Bitcoin as legal tender. Despite being illegal, more U.S. businesses are accepting crypto as payment. The Financial Crimes Enforcement Network, SEC, CFTC, and U.S. Treasury Department regulate crypto.
Recent SEC crackdowns aim to make the Bitcoin business obey the same standards as conventional securities. They want to safeguard investors from fraud. Congressional members want a crypto regulatory framework by year’s end. 10 Whether this happens is unknown. The US government is considering a central bank digital currency (CBDC), a legal money backed by the government. No one knows how a U.S. CBDC would affect cryptocurrency prices.
Taxes on Cryptocurrency Earnings
We forgot the IRS, which regulates crypto. Taxes will come if you make money trading crypto. Crypto profits are taxed as capital gains like stock and bond sales. When selling or spending crypto acquired for less than a year, you will incur short-term capital gains taxes at your regular income tax rate. The tax rate is lower for long-term capital gains on crypto you owned for more than a year.
Cryptocurrency as a Long-Term Investment
Some financial institutions provide tax-advantaged cryptocurrency self-directed IRAs for retirement investments. Crypto IRAs are rare—probably for good reason. Crypto’s volatility makes it a risky long-term investment. Don’t invest your nest egg in anything that could disappear tomorrow!
Should I Invest in Cryptocurrency?
Crypto investing has left intelligent young people miserable and broke with no friends. The 2022 crypto meltdown spawned. Heartbreaking tales of broken dreams. If you don’t believe us about crypto’s risks, see this Twitter post: My family still considers me rich. I stare at charts for 12-14 hours a day without friends or a GF. Right now, I have $4.9K. 6 figures college loans, $20k+ CC debt. Every day is misery on Earth.” Try cryptocurrency if you wish. Knock yourself out if you’re willing to lose the money you may have spent on a Vegas roulette wheel. You won’t be punished. We want you to win with money and safeguard your retirement, but there is no proof that cryptocurrencies can achieve that.
Simply put, cryptocurrency is not a good means to generate money. We’re not suggesting cryptocurrencies will disappear. No, it’s not terrible. We argue that crypto has not demonstrated a track record of wealth creation. Better plan if you want to invest in something with a good track record: If you are debt-free, have an emergency reserve for 3-6 months, and are ready to invest, invest 15% of your salary in growth stock mutual funds, which are more secure than bitcoin.
Do not follow a craze just because it’s popular. Some individuals have taken out mortgages or withdrawn their 401(k) early to invest in bitcoin, which is not recommended. Don’t risk your finances, retirement, and family’s well-being. If you can’t lose the money, don’t invest in crypto.
A Better Way to Invest
The conclusion? Building money is a gradual process, with many unknowns in cryptocurrency. Could crypto become a legitimate investment later? Maybe. But for now, say no. Get-rich-quick schemes are simply that. Don’t risk it; invest your goals, dreams, and money.
Also Read: Btccryptic.com
