Pros and Cons of Cryptocurrency: A Beginner’s Guide

The take after statements do not constitute investment advice or any other advice on fiscal services, fiscal instruments, fiscal products, or digital assets. They are intended to provide general information. The following statements do not constitute an offer to conclude a contract for the buy or sale of fiscal instruments and fiscal products or an invitation to submit such an extend and to buy or sell any finical digital asset. Cryptocurrencies are subject to high fluctuations in measure. A worsen in value or a complete passing are possible at any fourth dimension. The personnel casualty of access to data and passwords can besides lead to a complete passing. Cryptocurrencies have the likely to reshape the fiscal global as we know it, and to question the very universe of traditional fiscal infrastructure. But what are the pros and cons of cryptocurrencies ? How do you decide which one to invest in—or whether to invest at all ? If you ’ re a little jumble by cryptocurrencies, don ’ deoxythymidine monophosphate worry. We ’ re here to break down the advantages and disadvantages of cryptocurrency, so you can learn everything you need to know. And if you ’ re however stuck, check out our template to Cryptocurrencies for Beginners.

Cryptocurrency Explained in 26 Seconds

5 advantages of cryptocurrency

While cryptocurrencies are a relatively recent invention ( Bitcoin, for model, started up in 2009 ), they ’ re decidedly here to stay, with all their benefits. From prospects of goodly returns to 24/7 trade on ultra-secure, transparent infrastructure, the world of crypto has batch to offer—if you know how to tap into it.

1. High risk—and the potential for high rewards

There are more than 10,000 cryptocurrencies on the commercialize nowadays and each one has its own particular quirks. But all cryptocurrencies have a few things in common—like their tendency to experience sudden spikes ( and drops ) in value. Prices are driven chiefly by the supply of coins from miners and the need for them by purchasers. And these supply-demand dynamics can result in goodly returns. The price of Ethereum, for exercise, approximately doubled from July 2021 to December 2021—quite the payday for investors who got on board at the right clock.

2. The blockchain technology underlying cryptocurrency is inherently secure 

Some of the major benefits of cryptocurrencies aren ’ thymine linked to the currencies themselves, but to the infrastructure that supports them. That ’ s the blockchain —the decentralized data-storage daybook that tracks every transaction undertaken on it. Once you make an entrance in the blockchain, it can never be erased. And with the blockchain stored decentrally across multiple computers, no hacker can access the entire chain in one run ; any information stored in it is dependable for good.

3. Bye bye traditional banks—hello to a fairer, more transparent financial system

By and large, our fiscal arrangement revolves around third-party intermediaries who process transactions. This means that if you make a transaction, you ’ ra placing your trust in one or more of these intermediaries—and the recess of the early 2000s made a batch of people wonder if that was a commodity idea. The blockchain and cryptocurrencies offer an alternative. They can be viewed by anyone, anywhere, so you can take part in the fiscal markets and make transactions with no intermediaries any.

4. Crypto trades around the clock

Another advantage that cryptocurrencies have over banks is that the crypto markets are always open. With coins being mined and transactions being recorded around the clock, you don ’ t have to wait for the NYSE, NASDAQ or any other substitute to start trade for the day if you want to buy, sell, or trade crypto. This has made such an affect that regular stock exchanges are looking into the option of trade stocks outside of regular bank hours as well—although that might however be some way off. So, for investors who are on the start 24/7, crypto might the best way to generate returns outside of normal work hours.

5. Cryptocurrencies could help investors beat inflation

Cryptocurrencies aren ’ t tied to a one currency or economy, so their price reflects ball-shaped requirement preferably than, say, national inflation. But what about inflation of cryptocurrencies themselves ? As an investor you can rest easy, for the most part. The total of coins is capped, so the measure available can ’ t spiral out of command, frankincense, no inflation. Some coins ( like Bitcoin ) have an overall hood, others ( like Ethereum ) have an annual detonator, but either way, this approach keeps inflation at alcove .

Discover N26 Metal

Experience premium banking with a metal Mastercard, priority support & exclusive benefits.

Upgrade your account today

(new tab)

N26 Metal card.

5 disadvantages of cryptocurrency

so that ’ s a batch of glitter, but is the lookout for cryptocurrencies truly sol golden ? Let ’ s take a attend at some of the drawbacks. Some are well resolved, others less so—but it constantly pays to keep them in judgment.

1. Understanding cryptocurrency takes time and effort

Cryptocurrencies can take a while to get your drumhead about. If you ’ re not a digital native, the concept of cryptocurrency ( let entirely the blockchain ) can feel anything but second nature. And trying to invest in something you don ’ t in truth understand is itself a risk. There are enough of on-line resources available to help you ( including N26 ’ s blog serial on crypto ), but you ’ ll placid need to dedicate some time to truly understand the pros and cons of investing in cryptocurrency.

2. Cryptocurrencies can be an extremely volatile investment

While the monetary value of a cryptocurrency can spike to dizzying highs ( with associated benefits for investors ! ) they can besides crash to terrifying lows just as cursorily. then if you ’ re looking to make stable returns, this might not be the best count. The cryptocurrency grocery store basically thrives on meditation, and its relatively small size makes it more vulnerable to price fluctuations. That in become can wreak havoc with the value of coins—one of the major disadvantages of cryptocurrency.

3. Cryptocurrencies haven’t proven themselves as a long-term investment—yet

While cryptocurrencies have become wide known and are hush gaining in popularity, it ’ s worth remembering that they have merely been around for just over a decade. The concept merely actually emerged with the publication of a egg white newspaper on Bitcoin in 2008. Stock markets, in contrast, can look binding on centuries of history. The London Stock Exchange, for model, was founded in 1801. gold has been a rise custodian of rate for millennium. But cryptocurrencies ? cipher actually knows what will happen to cryptocurrencies in the future—and you need to be brave to enter these chartless waters as an investor.

4. Crypto has serious scalability issues

You could be forgiven for thinking that digital currencies operate at lightning speed—and they do, up to a point. But at a certain flush they run into major issues which make it unmanageable to roll them out on a boastfully scale. Cryptocurrency providers themselves admit this is an issue, with the people behind Ethereum saying that the blockchain has reached “ certain capacitance limitations ” that slow the pace at which transactions can be processed. This can be a torment experience for transaction participants, to say nothing of the electric potential fiscal losses it can cause.

5. Crypto newbies are vulnerable to security risks

Cryptocurrencies might not have the risks that come with using cardinal intermediaries, but that doesn ’ t mean they ’ re completely dislodge from security issues. As a crypto owner, you could lose the secret key that lets you entree your coins—and with it, all your holdings. And then there ’ second hack, phishing, and all the other attempts to gain restraint by malicious means. This is something that seasoned investors keep an eye out for, but newer investors are more probable to be vulnerable to these kinds of traps.

What is the best cryptocurrency to invest in?

There ’ s no one cryptocurrency that ’ s substantially better than all the others. It comes down to personal preference, but there are things that you might like to look out for. Think about your individual hazard allowance ; can you stand to lose a substantial chunk of your investment if your choose coin plummets in value ? Are you using the mint entirely to generate returns, or are you hoping to pay for things with it, excessively ? Is it merely about the money, or are you looking to invest in a coin with a broader social or environmental impact ? One easy overture is just to pick the grocery store drawing card, Bitcoin. It ’ s the original cryptocurrency and the one which has built up the largest information base arsenic well.

What are the pros and cons of Bitcoin?

Bitcoin, which trades under the abbreviation BTC, comes with a host of benefits. It ’ sulfur capped at 21 million coins, it ’ mho guaranteed to be inflation-proof, and its headline-grabbing prices surely offer investors scope for reaping rewards. And Bitcoin is the most widely accept cryptocurrency for payments. Of course, it has its drawbacks. Bitcoin ’ s blockchain infrastructure starts to slow down once it exceeds a rate of seven transactions per second ( a real topic when you consider that Visa processes around 1,700 transactions per second ! ). And because it ’ s the best-known cryptocurrency of them all, it ’ s a key target for hackers and scammers of all stripes. For more insight about Bitcoin, check out our article What is Bitcoin ?.

What else should I know before trading cryptocurrency?

Cryptocurrencies can be a minefield for new investors. From unfamiliar terminology to complex engineering, it ’ s a subject that takes some getting used to. As with everything, trade cryptocurrencies comes with benefits and risks, but N26 is here to help. Whether you want to pay for everyday essentials with Bitcoin or use another coin to beef up your investment portfolio, we can show you all the pros and cons of cryptocurrency .

Extra virtual card

Get an extra virtual card with any premium N26 bank account—for free!

Learn more about N26 virtual card

Virtual card shown on a smartphone and a debit card behind.

Cryptocurrencies with N26

N26 has an align of resources to help you understand the latest developments in the world of finance. From Cryptocurrencies for Beginners to the details of What is a Crypto Wallet ?, N26 is by your side every step of the manner, empowering you to make reason fiscal decisions backed by dependable information .

What are the key benefits of cryptocurrency ?

Cryptocurrencies offer transparency and exemption from traditional fiscal infrastructures and have the potential for dazzling investment returns.

What are the benefits of mining cryptocurrency ?

Cryptocurrency miners receive payments of the currentness in question, along with the satisfaction of taking separate in an exciting new fiscal growth. To find out more, check out our article here .

How do I weigh up the pros and cons of each cryptocurrency ?

It ’ mho all about personal preference—your appetite for risk, plus what you ’ re in truth hoping to achieve from a crypto investment .

Leave a Comment

Your email address will not be published.