Just search for crypto or bitcoin investment; you will find hundreds of articles on why you should invest in them. All of them will provide you more or less similar reasons as the following.
- Cryptocurrencies offer higher returns.
- They have a high demand in the future.
- Digital currencies are likely to disrupt traditional fiat currencies.
- They offer a liberal financial system.
You will find many potential advantages to invest in cryptocurrencies. However, are they profitable in the long run? You must validate these reasons, and you also need to figure out the right cryptocurrency. There are many digital currencies apart from Bitcoin, which is the original cryptocurrency. All other cryptocurrencies are known as alternative coins or altcoins.
Many investors don’t understand and invest in altcoins because most of the altcoins are available at a low price. But this isn’t the right way to go, so read about the top five reasons why you shouldn’t invest in altcoins if you don’t understand them.
Why You Should Not Invest in Altcoins
If you want to invest in cryptocurrencies, you should know about the following five things that may save you from losing your capital.
Extremely Volatile and Unpredictable
First of all, altcoins are highly volatile and unstable because there is no real business behind them. Although some of them have applications in the real world, many people see them as speculation. The price fluctuations of altcoins are, therefore, very high and unpredictable. If you’re new to the crypto market, consider researching the risks involved before deciding to invest.
You May Lose All Your Investment
Many people are clueless about how these altcoins came into existence. It’s just the hype of the internet that drives people crazy. Many newbie investors think that they will become billionaires after investing in cryptocurrencies. But there is a chance that the bubble can burst anytime, and investors may lose all their capital in it.
Thus, it’s better to stay away from altcoins if you are not ready to take the risk of losing money. Although this rule applies to every kind of investment, it is more applicable to altcoins due to high-risk.
You May Fall into a Trap
There are more than five thousand altcoins available. More importantly, the crypto space is vulnerable to scams and cyberattacks. So you may become a victim of the cybercriminals and money launderers. So if you are not aware of altcoins and the risk involved in them, avoid investing.
The Market is Sentimental
Negative news can heavily affect the price of altcoins. As the number of altcoins is so high and the market is sentimental, there are no fundamentals, and it’s unpredictable. With so many uncertainties, the chance of losing your money is very high. However, you can choose some reliable altcoins like Ethereum, Ripple, but you need to study them and their future value.
Very Little to No Institutional Investors
One of the safest ways of investment is to invest in those where you find institutional investors. But there are very few to no institutional investors in some altcoins. As they invest substantial amounts, professional fund managers manage the investments so that you can rely on their decisions. Although some institutional investors invest in bitcoin, you should take the calculated risk even if you invest in Bitcoin.
If you are aware of all the above reasons and ready to take the risk involved in altcoins, you can invest in them. Otherwise, start with bitcoin as it is one of the reliable and popular cryptocurrencies.
However, if you want to trade, one of the easiest ways to trade bitcoin is by using pattern trader that uses an algorithm for trading. You just need to write the trading strategy algorithm, and the trading bot will automatically execute the trades. Let me know what do you think about this post in the comments section below.