Digital currencies had a good run in 2021, with many people joining the crypto community. That said, the first week of 2022 was not kind to bitcoin. Bitcoin lost 10.5 percent of its valuation in a matter of days. The week concluded around $42,000, down over 41 percent from its ATH in October of 2021. This has made a lot of people wonder: “Is crypto a good investment in 2022?”
According to cryptocurrency analysts, the Federal Reserve’s hint at hiking interest rates earlier than what they were planning. Consequently, a lot of investors were liquidating their bitcoin holdings and shifting to safer options. Other digital currencies, including Ethereum and Ripple, have also fallen during the first week of 2022. Ethereum and Ripple fall over 12 percent and 8 percent, respectively.
In this article, we will try our best to answer the question: “Is crypto a good investment in 2022?” We will start by looking at Bitcoin, as it is a good indicator for the overall market. So, without further ado, let’s get started.
Bitcoin: Is Crypto A Good Investment in 2022?
Bitcoin can answer the question for us. Because Bitcoin is by far the largest digital currency, it tends to be an indication of broad developments in the crypto market. Consequently, the majority of the market generally follows patterns initially observed with Bitcoin. Bitcoin’s price hit an ATH of almost 68,000 dollars in 2021. However, it fell below $30,000 in July. Because of this unpredictability, experts advise new investors to limit their bitcoin investments to less than 5% of their portfolio at first.
As per Time.com, a lot of analysts say it is just a question of time until Bitcoin reaches $100,000. It implies that 2022 may be the perfect opportunity to buy Bitcoin, to ride that wave. Additionally, a lot depends on the market sentiments when it comes to crypto. If investors believe that Bitcoin can hit $100,000, it surely will.
Does that answer our question? Is crypto a good investment in 2022? In some ways, yes. Bitcoin’s performance indicates a bright future for the whole crypto marketplace. However, we are not going to bury our initial question, “Is crypto a good investment in 2022?” just now. We still need to answer the most important question: is crypto a good investment in 2022 for a small investor like yourself and many others?
To begin with, let us look at some of the risks associated with the crypto investment.
Learn more about Bitcoin: A Beginners’ Guide To Cryptocurrency and Bitcoin
What are Cryptocurrency risks?
Investing in digital currency is not for the faint of heart. It requires you to not only understand the risk but also how to tackle these risks. Let’s look at some of the risks associated with cryptocurrency.
Unanticipated swings in the market mood can cause significant and unforeseen price movements. It is not unusual for the price of coins to plummet by hundreds of dollars in a matter of seconds.
2. No regulations
No regulations are one of the major features of cryptocurrencies. However, it has some drawbacks. At the moment, cryptos are unsupervised by any government or central bank. They have, nevertheless, recently begun to garner increasing notice. For instance, there is debate about whether they should be classified as a commodity or virtual money. Government decisions can have a big impact on the prices of cryptos.
3. Hacker danger
They are vulnerable to mistakes and hackers. As of now, there is no ideal method for preventing technological flaws, human error, or hacking.
4. Discontinuity or forks
Hard forks and discontinuity are extra dangers associated with cryptos. Before investing in these items, you should get acquainted with these hazards. When a hard fork happens, there may be significant price fluctuations in the immediate aftermath. Additionally, many will cease trading if they do not obtain trustworthy pricing from the financial instrument.
Like stock or forex trading, cryptocurrencies are high-risk, high-reward investments. Instead of avoiding these risks, investors need to learn how to tackle them effectively. Next in our article on “Is crypto a good investment in 2022?” we will look at 5 reasons why you should invest in crypto in 2022.
5 Reasons to Invest in Cryptocurrencies in 2022
1. Have command of your assets
The fundamentally decentralised structure of cryptocurrency trading provides you with ownership over your assets. It allows you to hold and store them without the participation of a third party. The worth of the asset is not established by the exchange or a middleman. It allows traders to profit from the current exchange rates to the greatest extent possible.
2. Deflationary assets
The supply of cryptos is restricted. As a result, they are deflationary assets. It implies that their buying potential increases with time. Every coin has a mechanism that limits its overall supply.
3. Transparency and security
Cryptocurrencies are popular because of their complete transparency. It is made possible by open-source and publicly verified technology.
4. Trading that is adaptable and independent
Crypto trading is available 24 hours a day, seven days a week. It allows traders to plan their trades at any time of day. Furthermore, there are other altcoins like Ethereum, Shiba Inu, Luna, and many more. This raises the potential for profits and enables traders to diversify their portfolios.
5. A Transformational Technology
Blockchain technology enables cryptocurrencies. Investors consider it to be a disruptive technology for a wide range of sectors. This technology makes cryptocurrencies an appealing venture for those who believe in their prospects. Investing in cryptocurrencies is an opportunity for those who think in that vision to make large profits while also contributing to the development of this innovation.
But, what if, you are an investor and not a trader. Is crypto a good investment in 2022 for long term investors? We will answer your question in the next section. Let’s go!
Is crypto a good investment in 2022 for long term investors?
Many coins, such as Bitcoin and Ethereum, are founded with ambitious goals that may be realised over extended time periods. The sustainability of any crypto project cannot be guaranteed. However, if a coin initiative meets its objectives, early adopters may be highly rewarded in the big scheme of things.
To achieve long-term success, every digital currency project must achieve mainstream acceptance.
Additionally, we previously mentioned the potential of blockchains. If you believe in its potential, then long term investment is the key to success in the crypto space. The difficult part is to find the cryptocurrency that will carry the future of blockchains.
So, is crypto a good investment in 2022 for long term investors? The answer is a big YES, but only if you have patience and the right goal in mind.
While there are several grounds to be wary about digital currencies. However, this new asset class is attracting many mainstream investors. The blockchain sector is usually touted as transformational. Investors believe that it has the potential to change the world in a similar manner to how the Internet changed the world in the 1990s.
On the other hand, advocates of cryptocurrencies should exercise caution before indulging in cryptocurrencies. They should take the time to grasp the most common problems that new investors face. Additionally, they should understand the complicated security standards and properly investigate this new asset class.