Since the COVID-19 pandemic began in 2020, it seems like everything has gone online for safety and convenience, including work, education, medical care, entertainment, sales, and more. Unsurprisingly, cryptocurrency, which encompasses all types of digital or virtual currency, has also taken off in 2021.
Investments in cryptocurrencies have skyrocketed recently. Cryptocurrency users and investors have created a lot of hype about this market and its potential. The biggest cryptocurrencies include Bitcoin and Ethereum, while exchanges like Binance, Coinbase Exchange and Kraken offer places to invest, trade and explore new markets. However, the cryptocurrency is volatile. Recently, as the news has worn off, many investors have started questioning the long-term risks and viability of cryptocurrencies. Here are some ways to diversify your investment portfolio or find alternatives to cryptocurrency.
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Crypto Risks and Challenges
Despite its recent popularity, fueled by an increase in digital accessibility, decentralization and social media excitement, the cryptocurrency presents significant risks for investors. Here are some of these top threats that could endanger your investments:
- High competition: The meteoric rise of Crypto comes with downsides for newer investors. Affordability is a plus, but allowing anyone to get involved has led to a surge in competition. It’s harder to hit big when everyone wants to get in on the action.
- Volatile market: It is common knowledge that any market based on the hottest new technology is riskier than traditional options. Cryptocurrency is a new area of investment and is still under development, which means that the market is constantly evolving: a single social media post can make a particular currency jump or plummet.
- Vulnerability to Cyber Attacks: Many cryptocurrencies or exchanges are hosted on unstable platforms. Its recent popularity puts cryptocurrencies at greater risk from cyberattacks. Hackers or other bad guys work hard to break into these systems and steal your investments.
- Little or no consumer protections: Decentralization is seen as an important feature for many cryptocurrency investors, but the lack of regulation means there are almost no consumer protections in place to protect market participants from scams, cyberattacks and other risks.
- Incoming and future regulations: Thankfully, consumer protections and other regulations are on the way. The rapid growth of Crypto has caught the attention of the entire investment community, including governments and regulatory bodies. These agencies have started taking a closer look at the risks and potential of cryptocurrency.
- Uncertain long-term strength: As with any new market, there’s no telling how long the bubble will last before it bursts.
Alternative Ventures for Crypto Investors
New and traditional markets are filling the void as cryptocurrency experiences uncertainty and failures. Here are some alternatives to diversify or renew your investment portfolio.
Artificial intelligence (AI) is enticing if you are still interested in getting involved in a cutting-edge technology market. Even large companies like Microsoft have investments in this constantly developing sector. AI is often more sophisticated than many cryptography or blockchain efforts.
You may be exhausted to keep up with the latest technologies with their volatile markets and high risks. If so, residential and commercial real estate are proven investment opportunities. People are constantly looking for new residences, whether they need a larger home to raise a family or are exchanging a timeshare for their vacation home. In fact, the vacation rental market was globally valued at $87.09 billion in 2019 and is expected to continue growing.
The markets don’t get much more traditional than precious metals. Gold, platinum, and silver are high-value, affordable assets with lasting power, nowhere near the volatility of the current cryptocurrency market, despite some claims.
Explore crypto alternatives
It is a good idea to consider diversifying your portfolio if you are invested in cryptocurrency. Risky, uncharted markets make you vulnerable to big losses, but you can mitigate them by exploring other options.
Image Credit: Wit Olszewski/Shutterstock
Devin Partida writes about AI, apps and technology at ReHack.com, where he is managing editor.