10 Pros and Cons about cryptocurrency
I first heard about Bitcoin in 2013, when a friend at work told me about his brother who had purchased Bitcoin and was making a killing. At the time, Bitcoin was $800 and I was interested, but didn’t know where or how to purchase it. When Bitcoin dropped to the $200 range the following year, I felt good that I dodged a money losing opportunity.
In October of 2017, I had another friend from work who talked to me about Bitcoin and Ripple (XRP). He was nice enough to show me how to purchase and how to set up an account on Coinbase and the Chinese exchanges Bittrex and Binance so that I could purchase a variety of coins including XRP. Over the next 6 months, I had more paper gains and losses than I could imagine. Of course, I didn’t bank my gains and when everything was said and done, I had just about what I started with. But that experience was enough to get me interested in the crypto markets.
I stayed away until 2020 and decided that I was going to make a bold move before the halving event. Unfortunately, I got weak hands in March and sold at just about the worst time. But I stuck with the market and adjusted my strategy and got back in July 2020. Currently, I am very optimistic about the market and think that there are great times ahead. The positive news just keeps piling up and I’m hearing from more friends and family members who are looking to get exposure in the crypto markets.
I’ve compiled a list of good and bad things related to the crypto markets to illustrate some things that I have learned and to hopefully show you that your frustrations are not alone and that your triumphs should be celebrated as you are taking on the risk of this new asset class. None of this is financial advice and, if you are going to invest in cryptocurrency, like others I would only risk what I am willing and comfortable losing.
Let’s start with cons about cryptocurrency.
- Uncertainty- The crypto markets are filled with uncertainty. We have uncertainty about prices, manipulation, rug pulls, regulations, technological advances, correlations with stocks and gold and the dollar, as well as whether individual projects will work or have a future. If you can’t handle uncertainty, than the crypto markets are going to be hard for you unless you just invest and tune the noise out.
- Moving Cryptocurrency- I hate transferring cryptocurrency. I get nervous every single time I move any cryptocurrency. And I have lost money forgetting memos or sending my crypto to the wrong address. Whenever moving cryptocurrency, it’s usually a good idea to send a small amount first to make sure that you are sending it correctly.
- Taxes- It’s hard to keep track of trades, interest, losses, and gains. Yes, there are services that you can pay for to help out. But it gets extremely complicated especially when using decentralized exchanges like Uniswap. It’s also difficult to know all of the laws regarding spending cryptocurrency.
- Different rules in different countries- Being a US resident, I am unable to use Binance and many other international exchanges and must try to find roundabout ways to invest in some projects. I like being able to use a centralized exchange as it gives me peace of mind, but I also want to be able to get into projects early which often times requires either using different exchanges or decentralized exchanges like Uniswap.
- Fees- The point of technological improvement is to make things easier and cheaper. Unfortunately, there are many fees involved with cryptocurrencies. The commissions to buy and sell add up very quickly and gas fees to move anything on the Ethereum network have become outrageous. It has come to a point where moving crypto currencies or purchasing on Uniswap doesn’t make sense for me.
- Price Volatility- Cryptocurrencies can move extremely fast in both directions. One day, you are feeling on top of the world. That same evening, you can feel like you are lying passed out in the gutter. This is the nature of crypto. It’s not unusual in a bull market to see projects increase by triple digit gains in one day. It’s also not unusual to see these projects drop 90%+ in a bear market. If volatility is a big concern, it’s probably best to stick with larger cap projects like Bitcoin or Ethereum which are slower moving relative to the altcoin market.
- Choosing which project to invest in- There are thousands of different cryptocurrencies. When researching them, it seems like each project makes sense and obviously will be huge. Unfortunately, many will fail. I’ve come to realize that during bull markets, the projects that receive the most hype are typically the ones that perform the best. Just like the stock market, momentum plays seem to be the best option in our current market.
- Learning how to do new things- I tried to used DeFi and got liquidated through a margin call within two days. I thought that I lost my money, but later learned I just got hit with some really high gas fees. This was enough to keep me from doing DeFi on my own. There are countless videos and instruction on how to do things, but there are still some concepts that I can’t grasp. As an example, I am tired of high gas fees, and want to try to use Binance’s decentralized exchange. I can’t figure out how to change my wallet to be compatible with Binance’s BEP tokens so I am going to miss out on this entire ecosystem.
- Creating and sticking to a strategy- My lack of strategy in the past has cost me dearly. I am committed to sticking with a strategy and creating goals for individual projects as well as my overall portfolio. I have been wrecked and I have missed out on massive opportunities. But the cliche holds true: “Failing to plan is planning to fail.” Build a strategy with goals and do your best to stick to it.
- Noise- It’s easy to read an article or hear a piece of news and have a knee-jerk reaction. Some days, I’ll read one article saying Bitcoin is going to 6 digits and then next article will say it’s going to massively correct downward. Unfortunately, I believe that almost all markets are manipulated. There are plenty of shills that only say one side of the story. But, I also listen to the news because it allows me to try to find the hype and get ahead of certain projects. In the end, the noise is a fickle mistress.
Now, let’s move onto the Pros of cryptocurrency.
- Gains- Profits brought me into this space. I am seeking the upside potential of a game changing technology and being in the early innings of the ballgame. I have made more money in a day than I can make in a month at my job. I have also lost a month’s wages in hours. But these gains can happen frequently in a bull market and they provide an amazingly euphoric feeling.
- Interest- I am a fan of saving money. I hate that my money in the bank loses value to inflation. I love that I can transfer my money into stablecoins and get interest on platforms like BlockFi, Celsius, and Nexo. I wrote an article about this, feel free to check it out: https://link.medium.com/7e5KqRyLVdb Also, I included referral links at. the bottom of this article where you can get bonuses if you decide to use the services.
- Learning- I enjoy learning new things and about the monetary system in general. My dive into cryptocurrencies has lead me to learn a lot about the financial systems and how people’s ideologies on fiscal policy are similar to religions as far as how the beliefs differ. It has helped me define what my own conclusions are and I am excited to see if I can position myself accordingly.
- The community- Being team crypto is a lot of fun. I enjoy the positivity I see on Reddit and YouTube. The doomsayers like Peter Schiff and Nouriel Roubini are celebrated when they are wrong. Corporate billionaires wind up with egg on their face when they change their opinion because they want to chase the profits. Even though there is no customer service you can call, I have had many questions answered on Reddit, Telegram, and Discord. I have also found new projects from the communities that have been profitable.
- The narrative- Like most people, I enjoy rooting for the underdog. Crypto has a great narrative that it can improve people’s lives and make us less dependent on governments, banks, and institutions for our money. It also allows you to own your own money which is unique in our global setup. It is outside of fiat currency and it’s momentum keeps increasing each cycle.
- It’s simple or complicated- You can take an approach of dollar cost averaging into just Bitcoin or you can spread your bets like a Roulette table. Or, you can just gain interest on dollar backed stable coins. Just like cooking a high quality steak, there is no absolutely best way for investing in crypto. Also, unlike stocks where there are thousands of options, you can just stick to top cryptos and learn specifically about the projects in the sector(s) that you are interested in.
- The crypto market never closes- Crypto can be traded 24 hours per day 7 days per week 365 days per year. This could be viewed as good or bad.
- It’s the future- We don’t know if Bitcoin will replace gold. We don’t know if Ethereum is going to be the building blocks for financial markets and derivatives. But the fact that governments are fast at work at digital currencies illustrates that digital money is the future. For better or for worse, it’s better to embrace the future than to fight it.
- The possibilities are endless- New technologies lead to innovations. Because of our smart phones, we are always connected and will never get lost. We have an entire computer sitting in our packet. Soon, we will be able to control all of our wealth from these smart phones and use them as a means of exchange. The sky is the limit and some of the brightest minds are at work making improvements in our daily life.
- It’s global- The barrier to entry in cryptocurrency is low. Basically, anyone can partake who has an internet connection. There are over 8 billion people who can join the crypto market. Getting in now seems early and adoption is hockey sticking. Get in now and enjoy the ride!
Thank you for taking the time to read about some of the pros and cons of cryptocurrency. I am positive I have only scratched the surface. If you are interested in earning interest on your crypto, please use my links to get a referral bonus. And if you want to trade using Binance.US, I have also included my referral link.
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