With the current situation of the world economy, of uncertainty and recession, cryptocurrencies are emerging as an attractive option, especially among young investors. But what are these digital assets? What risks and opportunities do they bring? How can we start investing in them?
“Cryptocurrencies are digital assets that work with a decentralized system that verifies transactions, maintains records and makes their value volatile,” says Orlando López, a financial economist specialized in risk management and professor of the Economic Engineering program at the Franz Tamayo University, Unifranz.
Since the emergence of Bitcoin, the main cryptocurrency, in 2008, these digital assets have revolutionized the way we understand money and investments. Currently, there are thousands of cryptocurrencies, the most popular being Bitcoin, Ethereum, and BNB.
“The main attraction of cryptocurrencies lies in their potential for appreciation. Some investors look for quick profits due to the high volatility of these currencies, while others consider them a tool to diversify their portfolios in the long term. In addition, cryptocurrencies offer access to a global financial system without depending on intermediaries such as traditional banks,” adds López.
The expert indicates that, however, it is necessary to learn some things before “jumping into the pool” and investing in these volatile and risky assets, but with great potential.
First of all, says López, it is essential to understand how cryptocurrencies work before investing. Many new investors are attracted to success stories without considering the risks involved. According to experts, cryptocurrencies do not generate guaranteed returns, and their value can vary drastically in a matter of days or even hours.
As a second point, it is very important to choose an exchange (buying and selling platform) with a good reputation is crucial. Platforms should offer transaction security and ease of use, especially for those just starting out.
Finally, unlike physical money, cryptocurrencies are stored in digital wallets. These can be hardware wallets (physical devices) or software wallets (applications). Hardware wallets are considered more secure, since they are disconnected from the internet.
Risks
López indicates that the greatest risk of investing in cryptocurrencies is related to the volatility of these assets.
“Cryptocurrencies are famous for their fluctuations in value. For example, during the “cryptocrash” of 2022, many currencies lost up to 60% of their value, which caused million-dollar losses for investors and the closure of several exchanges.”
Another risk is related to the lack of regulations and regulations, since, as they are recently created securities, in countries like Bolivia, where until recently their use was prohibited and investors faced multiple obstacles to accessing these currencies. On the other hand, governments such as El Salvador have adopted Bitcoin as legal currency, while Mexico and Peru show more cautious positions.
Another risk comes from its digital nature, as the use of unregulated platforms or the lack of security measures can lead to the loss of assets. There are cases of lost prepaid cards or fraudulent platforms that have scammed users.
Despite the risks, López observes that there is currently a period of relative stability in cryptocurrencies such as Bitcoin, Ethereum and BNB. Although the variations are still present, they have remained within controlled margins, attracting investors interested in the medium and long term.
How to start investing in cryptocurrencies
Research: Before choosing a cryptocurrency, research its purpose, technological backing, and historical market behavior.
Choose a secure platform: opt for recognized exchanges that comply with security regulations. Some examples include Coinbase, Binance, and Kraken.
Diversify investment: never invest all your funds in a single asset. Diversifying reduces risks.
Set limits: define how much you are willing to invest and what percentage you can risk without compromising your financial stability.
“Investing in cryptocurrencies can be an attractive option for those looking to explore new forms of investment. However, it is essential to educate yourself about its operation, risks and benefits. The key is to plan carefully and be prepared for the fluctuations of this dynamic market,” concludes the expert.
