Investing or trading cryptocurrencies has become a new trend in society since the end of 2020. The steady price performance of some coins plus the proliferation of crypto asset exchange platforms has made people interested in holding this digital asset.
However, the cynical look still seems to exist in the midst of this enthusiasm. There is a view in society that investing in cryptocurrencies is very dangerous and full of speculation. While others think that betting on crypto assets is like gambling. The reason is that cryptocurrencies are “unreal” goods.
If so, why are there still people who believe so much in cryptocurrency investing? You can find the answer below.
Various Reasons for Cryptocurrency Investment
1. Blockchain Technology
Blockchain is a technology that eliminates the role of financial intermediaries in its activities. Thus, transactions between one person and another become easy and cheap.
Moreover, the function of blockchain technology is increasingly complex with the presence of smart contract features in several technologies, such as Ethereum. This feature paved the way for blockchain to provide products like those of financial services companies but decentralized. For example, lending and borrowing services, insurance, and saving.
Many think that blockchain technology can trigger a financial revolution in the future. Thus, people increasingly believe that cryptocurrencies will have a real use case in the future.
Investing in crypto assets reflects their way of making money while supporting easier access to financial services in the future.
2. Alternative Stores of Value
For some people, holding fiat money is a disadvantage. Apart from being in unlimited supply, its value will also be eroded over time due to the inflation rate.
However, that does not apply to cryptocurrencies. Some crypto assets have a limited supply, making them a great choice for storing wealth (store of value), one of which is Bitcoin. In addition, crypto assets do not have a direct correlation with inflation rates.
Thus, those who are worried about future large inflation rates and monetary crises can push their way into the cryptocurrency market.
3. A Good Way To Train Your Mentality
Buddy Cuan may understand that cryptocurrency price fluctuations are fairly fast. Not to mention that it is full of rumors and rumors that always make market players panic.
But for some people, these moments are a learning opportunity to mitigate trading and investment risks. Putting money in cryptocurrency can be galvanizing for them to put their brains ahead of emotions in making decisions.
Cryptocurrency Investment Risk
While there are reasons to put money in cryptocurrencies, there are also many reasons to stay away from this digital asset because of the risks. The following are some of the risks of investing in cryptocurrencies that make people seem to stay away from cryptocurrencies.
1. Volatile Market
Cryptocurrency prices are constantly rippled back and forth and are unpredictable. You also find it difficult to estimate profit or loss in dealing with this one asset.
However, risk can still be mitigated. You can minimize the impact of cryptocurrency price fluctuations by diversifying your assets.
Cryptocurrencies are technology-based objects, so these investments are very vulnerable to hacking. As a result, the crypto coins held by investors can disappear and lead to very deep losses. Thus, investors need to ensure the reputation of the cryptocurrency platform before “diving” into it.
3. Beware of the Fraudulent Market
Cryptocurrencies may be on the rise. But unfortunately, there will definitely be irresponsible people who will take advantage of this moment. Yes, the trick is to persuade investors to put money on fake cryptocurrency platforms.
So, what investors can do is look at the track record of the platform on the internet. In addition, make sure that the platform has obtained a permit from BAPPEBTI, the authority that oversees crypto asset trading in Indonesia.
4. Lack of Supervision and Regulation
The cryptocurrency universe has a decentralized nature. That is, the activities in it are not regulated or supervised by a particular regulator. In contrast to financial services, where all activities are supervised and regulated by the Financial Services Authority (OJK).
Thus, no one is able to intervene when there is a market imbalance or criminal acts that cause huge losses in the crypto asset market.
5. Regulatory Barriers in Some Countries
Well, because cryptocurrency activities are difficult to control, some countries have decided to ban or limit activities related to this digital asset.
One example is China, a country that has insisted on banning cryptocurrency transactions since 2017. In addition, several countries have banned cryptocurrency trading platforms from operating on the pretext that crypto asset-related activities are “not in accordance with the conditions prevailing in the country”.