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Understanding the Risks and Rewards of Investing in Cryptocurrency

Investing in cryptocurrencies can be a big mouthful if you are new to it. It can be both a rewarding and dangerous market to put your money into, depending on your knowledge and research.

Some would probably call the crypto world the wild west of investment and finance, and that’s not entirely wrong. The crypto market is volatile, fast-paced, and can never be underestimated. As a newcomer with interest drawn towards cryptocurrency, it’s exciting to get into and a market to treat with respect. 

Many people have made a lot of money by investing in cryptocurrency over the past decade, but just as many, if not more, have lost a lot of money trying to chase the big jackpot as well. 

In this article, we will discuss some of the risks of investing in cryptocurrency and the rewards you can gain along the journey if you do it right.  

The risks that come with investing in cryptocurrency

Investing money always comes with a risk, which goes for everything, not just cryptocurrency. With that said, cryptocurrency investing often has more risk bound to it because of the volatility in the markets and how new it is. When people invest in cryptocurrency, they usually don’t do it for long-term safe investments but instead hope for a higher return on investment (ROI) over a shorter period of time than, for example, investing in stocks or bonds can. 

Before investing in cryptocurrency, it’s important to understand these risks and be willing to take chances. No matter how much research you do before investing, these risks can’t be avoided completely. 

Here are some of the most major risks you need to consider.


The first and probably biggest risk factor in crypto is the inevitable volatility. Cryptocurrencies are known for their price volatility, which can result in large gains or losses in a short period. The value of cryptocurrencies can fluctuate significantly over a short span of time due to various factors. These factors can be hype from a community, government regulations, big news surrounding the respective currency, and much more. While volatility is a risk, it can also turn out as a positive and be what ensures a big ROI.   

Source: Macro Hive

Market liquidity

Since cryptocurrency markets are still very new, they are relatively small compared to traditional financial markets. A consequence of this is that the liquidity of cryptocurrencies can be low, making it difficult to buy or sell large amounts of cryptocurrency without affecting the market price at times. Obviously, this isn’t something you will be affected by in every trade, but note that big swings in a cryptocurrencies price can happen if a “whale” decides to buy or sell a large quantity. Market liquidity is also a bigger risk when investing in smaller coins, whereas some of the bigger ones, such as Bitcoin (BTC) and Ethereum (ETH), can be safer in that regard. 

Speculation and hype

The last important risk to consider is the speculation and hype affecting cryptocurrencies. Since cryptocurrencies are so new and many people are entering and exiting the market, a large part of the market behaviour can be built around hype and speculation – at least for the smaller currencies. With how far crypto has come, this is rarely the case with the biggest currencies any longer, but can still have an impact. In periods with a lot of speculation and hype around crypto, there’s a higher chance of irrational market behaviour and bubbles. 

Cryptocurrency: A rewarding investment if done right

With great risk often comes great rewards, which is also true when investing in cryptocurrencies. 

Source: The Economic Times

Many have earned a lot of money investing in cryptocurrency, and all of them took a huge risk when doing so. In the end, they were rewarded because they made the right choices and also timed the market. 

Today, there are thousands of cryptocurrencies to invest in, and all of them could reward you with a big yield. Back then, the options were more limited, but that didn’t stop people from cashing in the big bucks. If you invested in BTC just six to seven years ago, you would have doubled your money many times. 

Those who jumped on the crypto wagon back at the start and held on to their investment are essentially those who have been rewarded the most. Sadly, those days are likely over, but that doesn’t mean crypto investing can no longer be rewarding. 

It’s still possible to find new currencies in development, which have a lot of room to grow. Investing in smaller currencies comes with the biggest risk, but with the right research and timing, this is where you can see an ROI of 1000% or more – maybe even over a short span of time. 

It’s also possible to buy into bigger currencies and still be rewarded. While BTC and ETH aren’t as volatile as previously, it’s still possible to catch some big upswings. It’s all about buying at the bottom to catch an upcoming bull market instead of buying at the top right before a bear market. It’s obviously easier said than done, and a lot goes into timing those exact swings.   

If you are new in the crypto world and want to learn before making your first investments, follow the official BingX blog for more beginner-friendly content. 

You can also start your crypto investment adventure on the BingX trading platform. Finally, you can also join our BingX Community to earn and learn more about crypto, trading and the latest news!

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