The digital currencies available today in the form of BitCoin and other Cryptocurrencies have attracted many towards their fruitfulness as a means of wealth management. Certain cryptocurrency financial platforms (including LedgerX) are now federally regulated and hence greater legitimacy has been gained by the virtual currencies. On the other hand, ICOs (Initial Coin Offerings), which are used for raising funds towards a new venture in the digital currency, and a cryptocurrency itself are exposed to the volatility and risks of greater magnitude. Still, the faster and greater results and profits propel the new capitalists and others to invest in the segment, and leading financial institution and firms of international repute, including JP Morgan Chase and Goldman Sachs, are finding Cryptocurrencies a suitable investment option. Like many other investment avenues, the cryptocurrency market has its own share of advantages and disadvantages or Pros and Cons.
Here are the 4 Pros or advantage of the cryptocurrency market.
1. Exceptional profits/returns
If you had invested $1000 in the cryptocurrency market in the year 2013, the investment would now (in the year 2018) be worth exceeding $400,000. It is not just Bitcoin that is gaining greater market value, many other cryptocurrency markets are also witnessing commendable success. The Block Chain service platform "Stratis" has witnessed 63000% increase in its initial $60000 investment.
2. Faster returns
The inherent volatility and risk that the crypto-currency markets have make them a platform where higher returns come at the fastest pace. The cryptocurrency market is based on the networks of interest holders and investors and cashing out the gains is possible and easy any time you wish.
While earlier shares/stocks were considered to be the most liquid asset, Bitcoins and cryptocurrency have replaced them. You do not need even a broker for selling the Bitcoins that you have and the hugely populated networks (the Datum network has a 56000 strength) provide you 24/7/365 opportunity for selling the cryptocurrency and gaining cash or ether. Here you do not need to wait for an acquisition or IPO, and as more and more start-ups are using ICOs » for raising money, the investment avenues are plentiful.
Know where your investment is going
Startups are found to change direction multiple times before they actually settle with their business and operations. They also face many speed bumps due to incorrect cash flow and fund arrangement. The transparency and convenience associated with cryptocurrency ensure that the company looks just like the projections were and you always know what will be the shape and functionality of the organization you invested in.
Here are 4 disadvantages or Cons associated with cryptocurrency
The cryptocurrency ICOs possess greater volatility because of their dependence on market and absence of regulations governing transactions associated with them. Further, crimes like hacking may deplete the investor of his or her entire investment any time. The cryptocurrency market has witnessed its own share of falls and loss of value. While the hugely drastic incidents relation to cryptocurrency and ICOs are rare, they are still possible.
2. Failure of the network
An ICO network that a company is built around may fail because of many reasons. For instance, if the product fails to attract the customers, the value of the cryptocurrency will fall. The value of the cryptocurrency depends on the network that is built around a product or a service and the offerings of the potential should be good enough to stay and sustain itself in the competitive market. Some ICO markets have failed entirely because of non-performing products. If the network stalls, the ICO fall will affect many.
3. Resources deficit
Cryptocurrency ICOs and business channels are also prone to the shortage of the resources. If the money is spent excessively or if the money raised through the ICO does not suffice the requirement, the whole platform will fail. That is why many of the cryptocurrency formulators today indulge in the pre-ICO fundraising rounds, in order to have plentiful or resources and to have firm evidence of the currency demand, in future.
Apart from the excessive use of funds, the cryptocurrency ventures are also exposed to other mismanagement issues. Cryptocurrencies do not form a subject in a number of finance related courses. If the team that handles the management of a particular ICO and cryptocurrency is not expert enough, you may lose all your investment. Hence you must check the background of the management team behind the cryptocurrency/ICO platform and know more about their capabilities, prior experience and skillset before actually investing.
It is important to study the structure of a market before actually investing in it. New ICO and cryptocurrency options are created by each passing day. As the platform is new, you can create a balanced investment portfolio for yourself and do calculated investment in different areas available (including cryptocurrency), so that a volatile situation does not breaks you down financially.