Back in 2013, cryptocurrencies first started to break into the mainstream news. Bitcoin rose from being worth nothing to being valued over $1,000 in an extremely short timespan. Even a cryptocurrency like Dogecoin gained a little notoriety somehow. For a while, things remained mostly quiet after Bitcoin crashed to around the $300 mark. Things really started to pick up in the past year or so with many currencies gaining incredible momentum. Ethereum shot up to $400 for a few hours, and then Litecoin smashed its $38 high to reach $90.
For all intents and purposes, the cryptocurrency market, in general, is steamrolling forward in a bull market. Corrections appear to happen every couple to few months, but that’s always been the case for these currencies. Smaller cryptocurrencies can gain or lose 30% in minutes and without warning after all. Still, the overall trend remains up, and most analysts believe cryptocurrencies have more room to grow. Many investors might recommend these currencies to friends or family members because the opportunities seem limitless.
Nothing is worse, however, than making such a recommendation.
More Good News than Bad, So What’s The Problem?
Cryptocurrencies as a whole gained billions of dollars in value throughout 2017. For every crash or correction, the market always seems to rebound in a big way, whether the rebound takes a week or a month. Many currencies continue to receive tons of development with new features coming on a regular basis. Bitcoin and Ethereum might be the best-known cryptocurrencies, but plenty of others continue to make strides in adoption and featureset. Most news coming out of the cryptocurrency world is overwhelmingly positive with only minor setbacks.
Issues with cryptocurrencies, in general, revolve around the occasional hack, adverse government action, and uncertainty. Ethereum-based initial coin offerings (ICOs) continue to leave a bad taste in investors’ minds when things go wrong. Similarly, the capability of Ethereum’s network has been questioned after congestion nearly broke the entire network. China has started to crack down on ICOs, and the US government mulled limitations on cryptocurrencies not too long ago. These things are troubling but mostly ignored by the market long-term.
Why Uncertainty Is A Major Problem For Investors
Uncertainty is the true problem with cryptocurrencies at the moment. Long-term they might be worth thousands of dollars apiece, but we’re not there yet. If you recommend cryptocurrencies to a friend or family member, you’re subjecting them to quite a bit of uncertainty. After you recommend a given currency, they might put hundreds or even thousands of dollars into that choice. That currency or the market as a whole could drop 15% or more within a very short period of time, which will spook the person you recommended the currency to in the first place.
Despite the long-term growth potential or what you tell someone, losing hundreds or thousands in the blink of an eye is hard to stomach. In reality, the average person is going to sell off their holdings the second something goes south. Cryptocurrencies drop large percentage amounts on a regular basis, and that’s par for the course here. Seasoned or knowledgeable investors might know this fact, yet newbies aren’t going to stomach these swings of highs and lows so often. Simply put, it’s irresponsible to make cryptocurrency investing a recommendation today.
You might believe you, and everyone you tell, can make a fortune off cryptocurrencies long-term. Such beliefs might even be proven right in the coming years. Then again, you could cost a friend or family member a lot of money through a simple recommendation. It’s better to state your opinions on cryptocurrencies and leave the conversation at that, instead of making an outright recommendation. Be responsible and tell people it’s a major risk and a volatile investment that may or may not pay off anytime soon.