Pros And Cons Of Trading Cryptocurrency To Make Money Online

Over the last few years, cryptocurrency has taken the world by storm. There are hundreds of cryptocurrencies active on the market today with Bitcoin, Ethereum and Litecoin being the most famous. Bitcoin is by far the most popular, versatile and widely used cryptocurrency and is the closest equivalent to traditional currency as it can be used to legitimately buy and sell a number of goods and services from merchants. Perhaps in the future, you might even be able to use Bitcoin to pay taskers on ezy peazy.

Cryptocurrency can also be exchanged between users in private transactions and swapped for other cryptocurrency or foreign currency on electronic exchange platforms. Because of its decentralisation and anonymity, it can also be used for illegal transactions on the dark web stores like the infamous Silk Road.

So what is cryptocurrency?

Cryptocurrency can be thought of as digital cash or currency that is controlled by a decentralised network of users. It isn’t subject to controls, regulations, laws and fees of central banking systems and governments. This decentralised system is brought about by peer-to-peer transactions facilitated by blockchain technology. The blockchain is a public distributed ledger of all prior transactions in cryptocurrency. Each type of cryptocurrency will have its own blockchain. The blockchain confirms the processes involved in the transfers of cryptocurrency and records them in a ledger which can be viewed by the public.

New cryptocurrency is created by groups known as miners who run the network servers. Their efforts produce new units of Bitcoin (or another crypto), which then get recorded and authenticated as new transactions & the periodic creation of new blocks.

Cryptocurrencies still remain very niche investments and are subject to crazy fluctuations in their value. People have made and lost a lot of money trading cryptocurrencies by studying the market and trends and buying and selling at precise times (this takes a lot of time, commitment, brainpower and financial investment!).

Continue reading to learn the pros and cons of investing in and trading cryptocurrency as a way to make money online.

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Pros of investing in cryptocurrency

1. Liquidity

Thanks to the establishment of trading platforms, exchanges and online brokerages cryptocurrency is a relatively liquid investment. Especially the more popular coins like Bitcoin and Ethereum that can be exchanged for fiat currency. You can easily trade bitcoin for cash or other assets like gold with low fees. When dealing with other altcoins you can exchange them first into Bitcoin before liquidating them into cash.

This makes cryptocurrency a good investment for short-term profit. They may also be a good long term investment due to their increasing demand. If you invested in Bitcoin when it was first created, you would have made a hell of a lot of money by now!

2. Low risk of inflation

Unlike world currencies which are regulated by their own governments, Bitcoin is immune to inflations. This is because the blockchain is infinite, meaning the cryptocurrency created on the blockchain can’t lose its value.

3. Exposure to new opportunities

The trading of cryptocurrency is relatively recent. There are new coins being created and becoming mainstream on a daily basis. As this currency is in its infancy and highly changeable this results in huge and unpredictable swings in price. While this can mean huge losses this also means opportunities to make massive gains. You know what they say, the bigger the risk the bigger the reward!

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4. Easy trading

If you trade stocks you need to hold a certificate or license and go through a broker to trade shares. But there is none of this with cryptocurrency. The trading process is much more simple and minimalistic. You simply buy or sell cryptocurrency from exchange platforms. The transactions are also instant, they don’t take days or weeks to be completed. You click a few buttons to confirm the transaction and the payment can be received in real-time.

Transactions are done through private and public keys which also ensure that each transaction is safe and secure.

5. Anonymity

Each transactions’ address, hash, blockchain number and miner name are recorded in the ledger for the public to see, the process of trading and transferring your digital assets is anonymous. If privacy is important to you and you want to prevent identity theft there are some coins you can invest in that are ultra-private and anonymous like Monero.

When you make transactions with your bank account and other platforms like Paypal or Transferwise the transactions can always be attributed to you, meaning merchants and public authorities can track how you spend and receive your electronic funds.

6. Accessible trading

Because there is no central bank or institution governing the crypto transactions, you can trade cryptocurrency at any time of the day as long as the user you are trading with is active. Peer-to-peer transactions can happen no matter where you and your recipient are in the world and what time it is. Unlike stock trading platforms, crypto trading platforms are available 24/7.

7. Easier & cheaper international transactions

Crypto transactions across international borders are no different than domestic transactions. There aren’t any transaction fees or international transaction regulations to navigate, which is often the case with regular bank transfers and credit card transactions and withdrawals.

Bitcoin is the easiest cryptocurrency to transfer internationally due to its popularity around the world.

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8. Lower transaction fees in general

Other digital payment methods such as credit cards, Paypal and Transferwise, cryptocurrency have lower transaction fees. For example, Bitcoin transaction fees are rarely more than 1% of its value. It is standard for other digital payment fees to be around 2% to 3%.

9. Built-in scarcity

Many cryptocurrencies have a finite amount of coins that will ever exist. For example, there will only ever be 21 million Bitcoins made. This built-in scarcity is likely to support its long term value against traditional currencies. This gives the currency intrinsic value similar to gold.

Most fiat currencies controlled by governments are non-scarce. Central banks can create new currency at will simply by printing more. The long term effects on the value of fiat by producing more are unclear. Note that all cryptocurrencies are scarce.

Cons of investing in cryptocurrency

1. Volatility

Volatility is by far the biggest risk when it comes to investing in cryptocurrency. The price of cryptocurrency is always swinging back and forward. This may be due to the fact it is still very new and people don’t trust these intangible decentralised funds. The price can change dramatically just by new reports on world events. For example, in 2017 Bitcoin crashed for $20,000 to $7,000 in a matter of weeks. The market is completely unpredictable and always changing. If you get on the right side of the trade you could make some big gains but on the other side, you can easily lose a lot of money.

It requires a lot of time and energy to learn the market, keep an eye on it and strategically trade to make a lot of money investing and trading in cryptocurrencies online. If you are wanting to trade on low-risk long-term investments, then investing in cryptocurrency may not be for you. However, if you buy the right coin in its infancy at very cheap prices and hold on to it, you may also make a lot of gains in the future. It really is a gamble.

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2. The threat of online hacking & theft

Hacking is a huge threat to cryptocurrency investors. Crypto exchanges let you buy and sell currencies using an app or website which leaves them susceptible to hack and theft. Cryptocurrencies are digital assets like gold, which can be stolen and not recovered if they are hacked into. Hackers have sophisticated tools they use to infiltrate crypto wallets and trading platforms to intercept transactions and send funds their way. It is really important you choose a secure exchange platform with measures in place to prevent hacking and theft.

Here are a few ways your crypto can be hacked & stolen:

• Stealing private keys to access & transfer crypto holdings

• Exploiting wallet vulnerabilities such as private keys and crypto funds being stored in the same place

• Operation of fraudulent exchanges & investment funds

• Attacking legitimate exchanges directly

• Attacks on dark web marketplaces

3. Little or no regulation

Since the crypto market is a decentralised network of users there are no major regulations that they are subject too. Cryptos aren’t taxed and governments don’t really have a clear stance on taxing cryptocurrencies and gains made on those investments.

This lack of regulation makes you more susceptible to being a victim of fraud and malpractice

4. Limited use in the physical world

Cryptocurrencies have limited use as a currency exchange for actual goods and services that we all need fiat currency to purchase. It is mainly used as a trading tool to make gains on investment which can then be transferred back into fiat to buy things with. This means it is still of limited use (this will probably change in the near future).

Bitcoin is the only cryptocurrency that is accepted as a form of payment, but it is only by a limited number of online merchants. Most companies don’t recognise it as a legitimate exchange.

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5. You can lose your wallet permanently

Your digital wallet, where your coins are stored either online or offline on a hard drive, can be lost or corrupted. If your hard drive crashes or a virus corrupts your waller file then you will lose all your coins and have no way of getting them back.

When investing in crypto it is always best to take all the safety precautions and backups to ensure this never happens. It can be safer to store your coins in an online wallet on an exchange platform but this does open you up to a greater risk for hacking and theft.

6. There is a steep learning curve

The idea of cryptocurrency and how it works is very technical, which makes it challenging to understand for most people who aren’t experts in the field of finance and technology.

It is possible to gain enough knowledge of cryptocurrency to successfully invest and make money trading online. It has similarities to traditional stock trading. You need to learn the different factors that affect price, learn how to read graphs and charts and understand how it all works in general.

There are plenty of blogs, Youtube Channels, websites and community groups online that can help you learn the ropes and have success investing in crypto. Just be warned it can feel a bit overwhelming at first getting your head around the world of crypto and blockchain technology.

7. There are no chargebacks or refunds

One of the biggest drawbacks of crypto is there are no standardised policies for chargebacks or refunds like all credit card and online payment processors have. For example, if you are a victim of fraud or theft by hacking, you cannot claim a refund through Bitcoin, but with a credit card company, you could.

Bitcoin’s decentralised structure makes it impossible for any single party to arbitrate disputes between users. Some newer cryptocurrencies, like Ripple, have a standards chargeback and refund policy but this is not standard across all coins.

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The environmental cost of mining cryptocurrency

Mining crypto like Bitcoin consumes huge amounts of electricity. Some of the biggest Bitcoin mining companies are based in China, where most of the power comes from coal plants, which contributes to the environmental damage happening on our planet from fossil fuels.

Hopefully, in the future, all mining of Bitcoin and other cryptocurrencies will be done using low or no-emissions renewable energy sources, but for now, it is a concern.

If you decide to try trading in cryptocurrencies to make money online, consider it your high-risk, high-reward portfolio. Don’t invest anything you aren’t willing to lose and definitely don’t put all your eggs in one crypto basket! We still very much rely on traditional fiat currency and stock exchanges so don’t rule these out as ways to make money online (and of course buy goods and services essential to life!)

You can always opt for a less stressful way by signing up as a tasker on ezy peazy and start earning money online as per your experience and skills!

Happy trading!