Cryptocurrencies have been in the news recently as this form of investment is rapidly gaining popularity in India. More investors are considering this investment medium as a lucrative option. If the news from Indian cryptocurrency exchanges is to go by, they are faster adding investors to their platforms this year than ever before.
Due to the sudden growth in customer base, cryptocurrency exchanges are positive about this emerging asset class being an attractive investment opportunity in India. However, the amount of cryptocurrency investments in the country is still very limited as compared to other traditional investment-class assets such as equities and fixed income.
Trends suggest that the younger population in India is placing their bets on crypto assets and moving away from traditional options. Many individuals are still hesitant while being keen on exploring the cryptocurrency space.
So, is it safe and reliable to invest in cryptocurrency? Read on to find out.
What is Cryptocurrency?
Cryptocurrency is an online or virtual currency that allows users to use it as any other currency for buying and selling goods or services. The term ‘cryptocurrency’ has been derived from different encryption techniques used for securing all transactions. Some of the key features of cryptocurrency are:
- The currency is entirely secured by cryptography. The main purpose of this method of encryption or cryptography is to offer safety and security to users.
- Cryptocurrency is powered by a technology called blockchain, which is a decentralized network managing and recording transactions through a network of multiple computers.
- The unique aspect of cryptocurrency is that it does not depend on banks for the verification of any transactions. Instead, the transactions are maintained in a public ledger in the form of immutable blocks on the blockchain.
- Bitcoin is known as a trendsetter since it is a highly traded cryptocurrency that has resulted in a massive growth in investor interest.
Additional Reading: Top 10 Affordable but Potential Cryptocurrencies to Invest In 2021
Why Should You Invest in Cryptocurrency?
Bitcoin and Ethereum have generated immense popularity among investors. Other notable cryptocurrencies that are attracting investor attention are Litecoin, Polkadot, and Cardano. Today, many businesses are adopting cryptocurrencies as a primary payment method.
The recent hike in the Bitcoin value has proven that cryptocurrency is going to be a promising and viable investment opportunity. This is mainly because cryptocurrencies allow global access, enhanced adaptability, individual ownership, high speed, security and affordable transaction cost along with protection against inflation & fraud.
Is Cryptocurrency a Safe & Reliable Investment?
Many investors today prefer investing in cryptocurrencies since these are not as complex as stock investments, which need careful selection and close monitoring. Investors must remember that no investment is genuinely safe and require regular monitoring. Cryptocurrencies are no different and have regularly shown the amount of risk involved. Here are some important points to note:
- While these are lucrative investment options for people today, investors should not assume them to be risk-free.
- Although cryptocurrencies can be safe, investors must ensure to take appropriate safety measures to avoid losing money to hacking incidents.
- Buying and selling cryptocurrency may not always be risky if the investor thoroughly understands the currency’s market and takes all security measures.
- There are numerous cryptocurrency options in the market today but not all options are safe.
- A certain amount of precaution is essential before investing money in cryptocurrency.
- Investors should conduct thorough background research on the coin creator and understand whether they are affiliated with reputed brands.
- Investors must also check if the coin creator’s screening processes are rigorous and whether the currency is traded on safe exchanges.
There can be serious consequences of not applying best practices to prevent hacking when it comes to coin management. With the growing popularity and preference enjoyed by cryptocurrencies, these investment options are constantly under the radar of cyber-criminals. Many instances have occurred in the past few years involving cryptocurrency owners who have either lost their coins or have been unable to recover them. This is usually highlighted as a downside of digital or virtual currency since it is not backed by a central bank or government.
How Can Investors Ensure Safety of Cryptocurrency Investment?
An easy solution to prevent losses due to unauthorized access is to store cryptocurrencies in an offline device, also known as a ‘cold storage’ device in crypto terminology.
Cold storage is a known method of holding cryptocurrency tokens offline, especially while protecting them from being stolen. The basic method of cold storage includes a paper wallet or an external hard drive. This can store the address and the key for accessing the specific currency.
Also important is for investors to access the cryptocurrency and related information only at the time of a trading operation. Investors must disconnect from the information after the transaction. This can allow convenient usage and storage of cryptocurrencies with minimal risks.
Cryptocurrency is considered an investment revolution of the 21st century. As the digital transaction sector is seeing a boom due to cryptocurrency, it is slated to join the ranks of traditional payment methods in the near future. Many investment experts believe that the future belongs to cryptocurrency and it is here to stay.
However, with every new technological advancement, there is a requirement for regulatory clarity and robust mechanisms to ensure the safety and security of investors. Therefore, cryptocurrency can be a reliable investment only if investors keep themselves updated about the best methods to prevent frauds and risks.
- Is Cryptocurrency a safe investment?
Cryptocurrency comes with the risk of value reduction due to market sentiments. It also requires investors to practice certain digital safety measures to keep the investment safe.
- Is Cryptocurrency a good investment in 2020?
Cryptocurrency is slated to offer huge value to investors as it is seeing a rapidly expanding market size with more participants every day. It can be a good investment for investors who are looking to diversify their portfolios by taking on additional risks.
- How reliable is Cryptocurrency?
Cryptocurrency is backed by blockchain technology to keep all transactions safe and documented. Under this, every transaction undergoes encryption for enhanced protection.
- What are the risks of investing in Cryptocurrency?
One of the main risks of investing in cryptocurrency is its rapid price fluctuations. Investors must be prepared for a sudden and drastic drop in prices due to constantly changing market sentiments.
- Is there any future in Cryptocurrency?
Experts indicate that the future of currencies is digital and since cryptocurrencies offer the required characteristics, these are sure to have a strong future in the investment world.