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Have Cryptocurrencies become Far too Risky for Investors?

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Cryptocurrencies exploded in popularity during 2017. This momentum carried over to the start of 2018. However, a bear market set in shortly after. Many cryptocurrency prices tanked, leaving multiple investors struggling and out of pocket.

However, many aruged that the exponential growth from 2017 was never going to be sustainable.

The cooling off period for Cryptocurrencies

Therefore, at some point a cooling off period was necessary, which we’re seeing now. The hype was reaching unprecedented levels. People with no knowledge of the cryptocurrency space looked to make a quick buck. This led to prices becoming increasingly inflated over time.  This bear run currently continues, but there are some green shoots emerging. Since this is a relatively new sector, there are growing pains evident.  However, others take this extended bear run as being the end of cryptocurrencies.

They believe that the 2017 growth was a flash in the pan and will be as good as it will ever get for the sector.

Therefore, you will get a different answer to this article’s question depending on who you ask.

Are cryptocurrencies too risky?

There is no denying that cryptocurrencies are a risky investment. Since it is such a new market nobody can be certain of anything. Investing heavily into cryptocurrencies will pay off for some people, but many others will lose significant sums of money.

As is the case with any risky investment, cryptocurrencies should only make up a small percentage of your portfolio. However, over time as the sector becomes mainstream and more stable, these investments will become less risky.

It is a good idea to have some sort of exposure to high-risk, high-reward investments. Cryptocurrencies aren’t going anywhere, but a lot of those currently in the market will disappear. It may be a case of only a few dozen tokens being viable in the long run. Almost 1,000 cryptocurrencies have died so far in 2018.

Previously, companies could raise hundreds of thousands of dollars simply by having an idea and a whitepaper. Now that more established participants have entered the market, it is considerably harder for these underdeveloped projects to establish any significant funding.

Cryptocurrencies as a whole don’t show signs of dying any time soon. However, it is likely that the majority of projects will not be successful. Therefore, investors need to be very careful about how they invest their money. Diversification is key.

 

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