Should You Invest in Crypto: The Good, the Bad, and the Ugly
Should you invest in crypto currency? With big gains posting over the last few years, it seems like a no-brainer. Between January 2020 and January 2025, Bitcoin (the first and probably the best-known crypto currency) gained more than 1,300 percent! But, before your eyes get big with visions of riches, do a gut check to see if you’re willing to tolerate the risks.
Should You Invest in Crypto: The Good
First, the obvious: You can’t ignore crypto’s potential for wealth-building. If you look from the beginning of 2017 and track to January of 2025, Bitcoin (BTC)’s gain comes in at more than 10,000 percent. It hit an all-time high in October, but has seen a selloff since then. Still, many analysts expect BTC to surpass that high in the coming months.
Also good: The emergence of exchange-traded funds (ETFs). With ETFs, investors don’t directly invest in crypto currencies, offering a little bit of protection against the risk. Another plus: the current administration is pro-crypto, and there are rumblings that the government may inject some level of regulation, and therefore a light level of protection into trading
Also: Crypto can serve as a hedge against inflation. BTC and some other crypto currencies have a cap on supply, creating a similarity to gold (a historical hedge against inflation[https://andrewstaxaccounting.com/investing-in-gold/] in that governments can’t just create more of it like regular currencies.
The Bad
Let’s start with the obvious again: Crypto is one of the most volatile and risk-laden investments you can make. The history of crypto is filled with drastic plunges in value. Some crypto currencies never recovered their original values, leaving investors in a serious hole.
And while there are rumblings of regulation, there is no guiding hand as of now. No agency backing the investment, or regulating the actors.
And don’t forget taxes: You’ll pay capital gains tax on any crypto you sell (or trade for goods and services) at a profit.
The Ugly
Unfortunately, the world of crypto has no lack of hackers and bad guys looking to grab digital assets. According to the Federal Trade Commission, US citizens lost some $1.4 billion to crypto scams in 2024. Phishing scams, too, are rampant.
Another thing to bear in mind: Pure speculation is at the heart of the crypto market, and is what drives trading. Unlike stocks of companies that have actual assets and possible earnings, crypto’s value comes exclusively from the mood of its market.
Should you invest in crypto? It really comes down to how much appetite you have for risk. You may want to approach it like going to a casino: never bet more than you can afford to lose comfortably. And never put all your eggs in one investment basket.
Links
Investopedia offers 10 rules for investing in crypto.
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