This is a free excerpt from one of Shortform’s Articles. We give you all the important information you need to know about current events and more.
Don't miss out on the whole story. Sign up for a free trial here .
Should you invest in cryptocurrency in 2022? Which currencies are outperforming the others? What are the risks and benefits of investing?
The cryptocurrency industry is large enough now that major investors take it seriously. But, before it becomes truly mainstream, it’ll need to address some basic problems that pose risks to the industry.
Keep reading for an overview of the industry to help you decide if it’s worth investing in cryptocurrency.
Which Cryptocurrency Should You Invest in, if Any?
After surging in value once again, cryptocurrencies have found their way back into the headlines. Their popularity and growth have regulators around the world trying to keep up, hoping to maintain control of what sometimes seems like a financial Wild West. So, should you invest in cryptocurrency? To help you decide, we’ll first review which currencies outperform the others and discuss the pros and cons of the cryptocurrency industry as a whole.
The Top-Performing Currencies
Most Americans would be hard-pressed to name cryptocurrencies other than Bitcoin, but investors actually have a variety of options. To decide if you should invest in cryptocurrency, first take a look at the front-runners, including Bitcoin, Ethereum, and Cardano.
- At a market value of $900 billion, Bitcoin is the industry leader. Being the best-known and most-established has advantages: An increasing number of companies now accept (or are planning to accept) payment in the currency, including Tesla, AMC Theaters, and PayPal.
- However, Ethereum, the second-largest cryptocurrency at around $365 billion, outperformed Bitcoin in markets last year. It’s easier to use and its blockchain structure promises more scalability and security, leading some observers to predict it’ll eclipse Bitcoin within five years.
- Nipping at their heels is Cardano, which, though currently small, has advantages: It’s as easy to use as Ethereum, and it’s far less energy-intensive to create than many others (the environmental impact of Bitcoin is likely to increase opposition to it in coming years).
- And for those put off by roller coasters, Stablecoins promise less of a ride: These are cryptocurrencies that are pegged to a national currency in an effort to decrease its volatility.
Pros & Cons of the Cryptocurrency Industry
Though some may rise and some may fall, overall, cryptocurrencies are here to stay—the industry is large enough now that big players have vested interests in its success, which may cause you to wonder if you should invest in cryptocurrency, too.
On a positive note, there are mechanisms in place that reduce the likelihood of an industrywide collapse. For example, many hedge funds have algorithms that automatically buy Bitcoin if it drops to a certain price. Investors now take cryptocurrencies seriously, and few funds don’t include them in some way in their holdings.
However, cryptocurrencies have many issues that will prevent them from, for example, replacing major national currencies any time soon. Foremost among these are their links to criminality and their susceptibility to cyberattacks.
- The anonymity of cryptocurrencies provides cover for ransomware attacks, which routinely extort huge payments from businesses, hospitals, schools, and city governments.
- Cryptocurrencies fuel other forms of fraud as well, including so-called “rug pulls” or exit scams where developers sell new tokens and then disappear with investors’ funds.
- All of the major cryptocurrencies have been victims of cyber theft—Bitcoin lost $450 million in 2014, Ether lost $50 million in 2016, and PolyNetwork lost $600 million in 2021.
And then, of course, you should consider the volatility before investing in cryptocurrency. Bitcoin dropped from $64,000 in April 2021 to $30,000 in May of the same year. Until the currencies show some signs of stability, most investors are unlikely to allot them more than a small percentage of their portfolios.
Want to fast-track your learning? With Shortform, you’ll gain insights you won't find anywhere else .
Here's what you’ll get when you sign up for Shortform :
- Complicated ideas explained in simple and concise ways
- Smart analysis that connects what you’re reading to other key concepts
- Writing with zero fluff because we know how important your time is
