Since the beginning of the COVID-19 pandemic, the world has been filled with too many surprises that we didn’t expect. Especially with the rise of inflation in 2022, prices have spun out of control, causing many people to worry about their financial situations.
Crypto seems like an excellent place to turn to when you are in a bad financial situation. However, what do you need to know about cryptocurrencies and how they function?
Let’s not wait any further because, in this article, we will find out how we can use crypto investments to get out of a financial situation.
Important things you need to know about cryptocurrencies
Before we let you know everything about if it’s a good idea to invest in cryptocurrencies or not, we need to inform you about what you can expect from cryptocurrency investments and what you need to do.
Cryptocurrencies are volatile
No matter how bad inflation might go or how good the crypto market may be going, it’s important to always keep calm in any financial tribulations. However, if you see that you have no other choice and want to turn to cryptocurrencies, you need to know that they aren’t the same as the stock market.
Cryptocurrencies can have major shifts in value within 24 hours or even within a single hour. Today, its value may be at an all-time high, but tomorrow, it may be the opposite. However, the good news is that not every cryptocurrency is super volatile, but it will all depend on the type of projects you are investing in.
Therefore, we recommend you take time to read about which cryptocurrency you want to invest in, and after, you can conclude which cryptocurrency you want to invest in.
Assess the situation by using a crypto research tool
Are you concerned about buying Bitcoin? Or do you want to buy another cryptocurrency such as Ethereum? Well, if you are, then the best way is to figure everything out on your own by using a crypto research tool.
A crypto research tool will rank cryptocurrencies based on their market cap, value, and the number of commitments an individual crypto project has made. Nevertheless, you should also read about external factors affecting the crypto market. For instance, the crypto market is struggling right now due to more than $12 billion of Tether (UDST) being burned and because Ethereum, the second-largest cryptocurrency, will stop mining and cut power consumption by 99%.
Nevertheless, you can start reading about countries that accept cryptocurrencies and those that strictly forbid them. After all, you don’t want to be dealing with cryptocurrencies if they are entirely illegal, do you?
Differentiate long-term vs. short-term investments
Even though cryptocurrencies are volatile, we can’t say that all of them are extremely unstable. However, some coins are better to invest in the long-term and those most favorable for short-term investments.
Long-term coins are those that have more minor price fluctuations in their values. Therefore, you won’t see a massive difference if you check on their value after six months or one year. Long-term coins include Bitcoin, Ethereum, BNB, Dogecoin, and more. However, short-term coins have many price fluctuations and can quickly shift in value within a day. These coins are usually those with a lower market cap, newcomers, or those who aren’t backed up by a stable crypto project. Some examples of short-term coins include The Green Metaverse token, Shiba Inu, Fantom, Immutable X, and more.
For instance, Bitcoin (BTC) is the largest cryptocurrency in the world, with the highest value and market cap. BTC will be a better investment in the long term than a newcomer since it was the first coin to start in the crypto world. Nevertheless, BTC has had major uphills and downhills. Only last year, it reached an all-time high of $64,000, but due to the high level of inflation and large amounts of crypto capital that has been burned, Bitcoin stands at $20,000 as of now.
However, after things start to stabilize, Bitcoin will easily reach multiple times its current value. On the other hand, if it was a newcomer, you can never know what might happen. That coin may plunge in value and may never rise in value again. So, your best option is to buy BTC with credit card rather than buy a currency you have too many doubts about.
Advantages of cryptocurrencies
Nearly immune to inflation
Unlike the Fiat currency, cryptocurrencies are ‘immune’ to inflation. This is because all cryptocurrencies during the release date have a fixed amount. Nevertheless, many of these cryptocurrencies also have a limited supply rate. For instance, Bitcoin has a supply rate of 21 million. However, it’ll take more than 100 years to be able to mine all of these coins. On the other hand, Fiat currencies don’t have a supply limit, which is where inflation is difficult to control.
Decentralized and self-governed
Crypto isn’t backed up by any financial institution, so it isn’t backed up by any financial institution. Moreover, the cryptocurrency transactions are stored within hardware by miners and developers, and the transaction fee is the reward they get for the hard work they have done.
Miners get paid for every transaction made, so they’ll record it, which is why cryptocurrencies are decentralized.
So, we come to this part, high returns. The part that everyone cares about whenever they are in financial trouble. Whenever you enter the crypto market, there are two things you can expect to happen, either to get excellent returns or invest in the wrong area and get the exact opposite.
However, suppose you take some time to analyze the market and invest in profitable cryptocurrencies that are stable and have potential in their projects. In that case, you can expect to get some high returns. For example, Ethereum was worth a few bucks in 2016 but reached an all-time high of $4,800 in late 2021.
What are the cons of cryptocurrencies?
Every investment is risky, but the crypto world shifts to a new level of risk. You can be an expert and still make large mistakes while investing in crypto. You never know what may happen the next day. It’s an unpredictable market that you can’t ever learn enough about. Today, you might win thousands of dollars, but the next day, you might lose more money than you invested.
Data losses can cause financial losses
Another huge disadvantage of cryptocurrencies is that if you lose your data, all your financial resources will go to waste. In order to entirely avoid this, you can consider investing in platforms with high-security layers and ask for many levels of verification.
No refund or cancellation policies
You can say whatever you like, but if your crypto investments get lost, they won’t be coming back. Nevertheless, there isn’t any refund or cancelation policy to help you back it up. Once lost, forever lost!
Should you invest in cryptocurrencies when you are in a financial crisis?
After what we have learned, we come back to the question that started the article. So, should you invest in cryptocurrencies whenever you are in a financial crisis? Well, before we give you an answer, ask yourself some questions.
Are you going to read detail by detail on each cryptocurrency project? If the answer is yes, we recommend you invest in crypto. However, since the market is volatile, you don’t want to risk investing in projects you aren’t familiar with. So, your best option is to read about the project and see what long-term goals it possesses.
Or, are you going to invest without reading about anything and go all-in? If that is the case, considering you are in a bad financial situation (let’s suppose), we won’t risk it. There are too many cryptocurrencies, and primarily if you aim to invest in projects with short-term gains, you never know if it’ll actually be a gain or a loss. Short-term projects will always be much more volatile than long-term ones.
So, the final answer comes down to what you aim to do. Do you have a purpose, or you’re willing to go all-in like you would when you play the lottery?
The final word
That’s about it for this article. Hopefully, you managed to gain some valuable knowledge from reading this article. The world is undergoing many different types of issues as of now, and the last thing you want to do is to be in a risky situation. However, if you take some time to read more about cryptocurrencies and differentiate them from each other. Doing this can save you from a financial crisis if the market is going well.
However, currently, the crypto market isn’t in its best days. However, it’ll most likely make a comeback anytime soon, so those who invest today might see many great returns tomorrow!