3 Reasons Why You Should Not Invest in Cryptocurrency

Many financial experts have warned against investing in cryptocurrencies due to their lack of features common to other investments or asset classes, such as traditional currency or cash, as well as their volatility, security, potential for future regulation and other factors. The price of bitcoin has been highly volatile in recent months, with a drop of almost 50% from its peak. There is a lack of an ecosystem in the functioning of bitcoin and there is not much to analyze, since it is not backed by any other asset. When you buy shares, you buy a portion of the property of a company that is in business to generate profits for shareholders.

On the other hand, cryptocurrency is not backed by any tangible asset and has no intrinsic value. The price at which you buy or sell cryptocurrency is based 100% on supply and demand. The price increases if the currency is popular and the supply is limited. If the currency falls into disuse, the price falls.

Due to scams and investor complaints, the 118th Congress introduced 50 bills and resolutions to regulate cryptocurrencies. In general, our financial system revolves around external intermediaries who process transactions. This means that if you make a transaction, you place your trust in one or more of these intermediaries, and the recession of the early 2000s made many people wonder if it was a good idea. Blockchain and cryptocurrencies offer an alternative.

They can be viewed by anyone, anywhere, so you can participate in the financial markets and make transactions without intermediaries of any kind. Cryptocurrencies can take a while to understand. If you're not a digital native, the concept of cryptocurrency (let alone blockchain) may seem anything but natural. And trying to invest in something you don't really understand is in and of itself a risk.

There are plenty of online resources available to help you (including the N26 blog series on cryptocurrency), but you'll still have to spend some time to really understand the advantages and disadvantages of investing in cryptocurrency. Cryptocurrencies can be a minefield for new investors. From unknown terminology to complex technology, it's a topic that takes a while to get used to. As with everything, trading cryptocurrency comes with benefits and risks, but N26 is here to help.

Whether you want to pay for everyday essentials with Bitcoin or use another currency to bolster your investment portfolio, we can show you all the pros and cons of cryptocurrency. N26 has a variety of resources to help you understand the latest developments in the world of finance. From cryptocurrency for beginners to the details of What is a crypto wallet?, N26 is by your side at all times and allows you to make reasoned financial decisions backed by reliable information. Download the N26 app today for a 100% mobile banking experience.

It has a limit of 21 million coins, it is guaranteed to be inflation-proof and its headline-grabbing prices undoubtedly offer investors the chance to reap rewards. People invest in random speculation, as there isn't much information available in this cryptocurrency market. And, while some new cryptocurrencies are backed by so-called hard currencies, there is little reason not to maintain the strong currency directly instead of doing so through cryptocurrencies. Nowadays, most people are attracted to Bitcoin, largely because they expect Bitcoin to become an excellent investment.

When I wanted to learn about investing, I studied successful investors such as Warren Buffett, Benjamin Graham, John Bogle, John Templeton and a few others. If you want to channel your hard-earned money and accumulate wealth with minimal risk, mutual funds can be considered a safe investment. Falls of up to 40% from peak prices are not unusual in the cryptocurrency market, but even falls of half that size can scare the average investor and leave a position at the exact wrong time. The cryptocurrency market seems fascinating to investors in terms of profitability, but it is at its peak according to economists.

But what are the pros and cons of cryptocurrencies? How do you decide which one to invest in or whether to invest or not? My conclusion is that buying and selling digital assets is a purely speculative move, and I don't consider it an investment at all. Without investor protection against these threats, the risk of similar raids cannot be ruled out which further increases price instability which contrasts sharply with the level of protection offered by the FCA and PRA when overseeing other investments in regulated institutions. With that as a backdrop here's a summary of three main reasons why you should not invest in cryptocurrency: lack of features common to other investments or asset classes; volatility; security; potential for future regulation; lack of an ecosystem; lack of intrinsic value; scams; investor complaints; lack of investor protection; lack of information; lack of understanding; cumbersome process; high risk; no guarantee for success. Transferring funds or investing money is still a cumbersome process in many traditional investment products.

Cryptocurrencies offer an alternative way for people who want more control over their finances but they come with their own set of risks that should be taken into consideration before investing.

Gertrude Majera
Gertrude Majera

Freelance web aficionado. Subtly charming zombie junkie. Typical coffee maven. Wannabe travel aficionado. Hardcore music lover. Passionate pop culture aficionado.

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