The pandemic affected every aspect of the economy. Regardless of nature or size, all the businesses suffered from the harsh circumstances caused by this disease especially the ones that were inaugurated during these difficult times. However, the cryptocurrency industry is among the few that not only remain unaffected but even used it (covid-19 pandemic) to its advantage.
The sudden increase in the market value supports the statements. And the presence of several online platforms including software applications such as the Bitpal app offered lucrative ways to trade cryptocurrencies. But similar to every other business, financial investors and monetary experts still warn people about the risks involved in this highly volatile investment.
Although the crypto industry remained fully operational and functional during the pandemic, certain reasons and risks caught the eye of almost every investor and made them somewhat hesitant to continue investing in cryptocurrencies. The article probes into some of these factors\reasons that make cryptocurrencies especially bitcoin a plunging investment. Therefore, if you are new to this crypto market and are looking to invest some serious money, this article may prove to be a guiding light to you.
The high-end efficiency and well-functioning of bitcoins had certain factors attached to it. These factors not only proved throughput but were also the sole reason behind its (bitcoins) high yielding rate of return. One of the reasons explained by the analysts is the unavailability of bitcoins in the ledger. This is because its creator Satoshi Nakamoto limited the mining capability to a specific number i.e. 21 million. These circumstances not only caused high competition but also increased the value per token to new heights.
Everyone can Invest
The barrier to entry is quite low. All it takes is someone who understands computer programming and enough coding knowledge to mine a coin for himself. Although the process can be quite timely, it is not for everyone. Secondly, decentralization also makes it quite approachable to anyone.
It’s Abundant and Easier to Invest in
The attractive property that lures many investors to plow in this highly volatile investment is its scarcity. However, the real scenario is quite opposite. The newbies trust the high-end encryption programming that supports the scarcity scenario but when they completely dive in, they start to realize the sheer abundance of bitcoins. Only the physical metals, especially gold are truly scarce and cannot be manufactured or mined. Bitcoins, on the other hand, are not so much limited as they are nothing more than but a result of high-end computer programming.
What truly limited the production of more bitcoins was the stunning response from the crypto world. However, as time passed, many began to understand that it was nothing but an attention-seeking play.
The Dilemma of Inadequacy
One of the hindrances associated with this cryptocurrency is its inadequacy. Usually, the problem occurred when the knowledge gained for the betterment degraded the usefulness. Although the need for digital wallets proved quite useful for storing tokens, it also caught the eyes of almost every hacker. As a result, the wallets became susceptible to theft. Secondly, given our declining and worsening economic conditions, the time is near when the investors may extract their attention from this project. Also, the currency is still not universally accepted.
Predictions for 2021:
Despite all the related global economic and demographic factors, miners expect to see a global recession in cryptocurrencies in the year 2021. The fear of inflation would generally support Bitcoin values, even in the case of recent yield pressure from the 10-year Treasury, which will have a massive effect on cryptocurrencies just as much as it will have on technology stocks.
An additional guiding factor is the increased acceptance of digital properties by younger investors. “Young people are gravitating toward bitcoin rather than gold, which indicates a generational change.
Having taken advantage of a supply chain shortage induced by Covid during the bitcoin bull market, these miners may now be able to further exploit what they have invested in automated equipment for space. Many traders and investment banks typically buy bitcoin miners at drops in the stock market then they hold them for a long time as long-term stocks like they do with gold miners and oil miners.
The Bottom Line:
Even with the high return rate on investment, bitcoins are still a dangerous investment. Therefore, if you are looking to invest in this form of cryptocurrency, be sure to look out for all the risks attached.