It’s a difficult question indeed, especially when it relates to cryptocurrencies. And that’s because crypto is at once the most promising and controversial asset class. Some envision a crypto-first financial future, while it’s nothing more than magic internet money for others.
But either way, one can’t deny that crypto-based investments have generated unprecedented returns in the recent past. This, in turn, complicates things for ordinary users hopeless scepticism on the one hand and hopeful enthusiasm on the other. And in between, there’s the chaos of excessive but unreliable information, with self-proclaimed experts and their so-called financial insights.
So, it’s almost impossible to answer the question in objective, black and white terms. To each, their own is the principle for making investment-related decisions. We must decide according to our circumstances, needs, and desires, rather than simply going with the flow—do what suits you the best, and not merely what everyone is doing. And with that in mind, let’s view certain aspects of cryptocurrencies as an investment.
Volatility: the number one argument against investing in crypto-assets, which is also valid to some extent. Look closely, though. Crypto isn’t the only volatile asset class out there. Traditional instruments like mutual funds can be highly volatile and still favourite investors looking for high-risk-high-gain options.
Time is also a crucial factor here early bitcoin investors, for example, have become multi-millionaires over the years, despite short-term volatility.
What about scams and frauds? Again, there’s nothing extraordinary about crypto in this regard. Of course, many people have lost vast amounts of money, but that’s true of every investment mode and not just cryptocurrencies. Plus, most security lapses in the blockchain-cryptocurrency domain has been due to its nascency. When mature, cryptographic encryption and decentralised network protocols will ensure much better security than any centralised (legacy) system can ever offer.
Finally, crypto-based investments are genuinely borderless and are widely accessible. The barriers to entry are tremendously low, and so are the costs. Fractional investments are also possible using cryptocurrencies, facilitating optimal participation from small, medium, and institutional investors alike.
So, on the whole, the ills that crypto suffers are also present in other legacy investments. But just like it is advisable to do your due diligence before investing in legacy investments, it makes sense to do so before putting your money on cryptos too.
DISCLAIMER : Views expressed are the author’s own
The author is a writer on Tech & Culture.