Should you Invest on Cryptocurrency for long term savings ?

Should you invest on cryptocurrency for long term savings

 

Every individual should save money for their bright future. If you are one of those who spends literally every penny you earned, You are making a huge mistake. Based on my opinion, I would say that 50/30/20 rule works absolutely on another level.

The rules states that “For every 100 you earn, Spend 50 percent on your monthly expenses and needs, Save 30% for short-term savings that may help you when you need money in emergency situations such as medical problems and stuff, Save 20% for your future so that you can lead a good life after your retirements.

Even though many people doesn’t agree with this rule, I would say, you can edit the rule something like 60/20/20 so that you won’t have to give up your current life. Well, enough of these sayings, I want to talk about the last 20% of the income.

As I already said, the remaining 20% would be saved for long-term purposes. So you have to store the money safely so that you can withdraw it after you retire. Obviously you can store the money in a bank. But, If you are a risk-taker like me, who likes to invest the money on some assets like Gold, stocks or Cryptocurrency, which one would be the best ?

So, Here comes the main topic of our article, Should you invest on Cryptocurrency for long term savings or is it better to stay away from cryptocurrency ?

 

The price Fluctuation factors of cryptocurrency

Cryptocurrency for beginners

Before, we answer our main question, we should know, Why one should even invest on cryptocurrency. Well, As I explained in the Cryptocurrency for dummies article, The price of cryptocurrencies keep changing from time to time. Here, The time can be years, Months, Weeks, Days or even hours. So, Why does the price of cryptocurrency fluctuates ? . Well, We will write a detailed guide on this topic later. But, for now, here are a few :

 

  • Availability: Even in the real world, When something is rare, The value of that thing goes high. Let’s take Diamond, Due to it’s rarity, The value of the metal is so high. Just like that, Cryptocurrencies value is determined by the rarity of the coin. If the coin is available so easily, the price would be low. If it is rare, Obviously, The price would be higher.
  • Demand: When a cryptocurrency like Bitcoin, ETH or Dash suddenly gets mentioned on Forbes that their prices are being skyrocketing or drowning to the grave, People starts investing on the coins. This suddenly increases the demand of the coin. When the demand outperforms availability, That’s when the prices starts to grow. Again, demand and availability are connected to each other
  • Big Whales: A popular theory suggests that, Some big people hold huge amounts of a specific cryptocurrency which they slowly release on to the market. When they release low amounts of coins to market, due to the aforementioned demand, The prices starts to grow. If they release more coins, The prices goes low.

In case you haven’t observed, All the aforementioned factors are connected to each other. One factor can easily affect another, so the prices would keep fluctuating. We will definitely talk about this topic later on. So, let’s move on to our main topic “Should you invest on cryptocurrency for long term savings ?”, shall we ?

 

Should you invest on cryptocurrency for long term savings ?

As you already know, why the prices keep changing in cryptocurrency market, you should now think whether it is a good idea to start investing on it. Here comes the problem, It is not easy as it seems. The answer can be right and wrong at the same time. Well, Don’t worry, I will explain it.

 

We can never actually predict the prices of cryptocurrencies accurately. Here is the price history of a popular cryptocurrency Bitcoin. Bitcoin now costs a whooping 7,00,000 INR approximately. Was bitcoin priced around 7 Lakh Rupess all the time ?

Bitcoin starting priceTaken from Wikipedia

As you can see, The price of Bitcoin in 2010 is $0.03. No one would have thought that the value of the bitcoin will raise so much that they can buy a car with 1 Bitcoin in 2020.

Bitcoin price in 2017

Taken from Wikipedia

As you can see in the above image, The price of bitcoin in February 2018 is about $6,000. Just imagine from being a zero to hero. Even though it took a lot of time to grow from $0.003 to $6,000, it is negligible compared the profit one can generate with patience and good prediction skills.

Here comes the problem, again in the same image, You can see that the price dropped again in December of 2018, from $6,300 to $3,300, which is almost half the price. That’s why, Cryptocurrencies are associated with huge risks. The price of any cryptocurrency can never be perfectly predicted.

 

Luckily, there is no limit on how many years you can store cryptocurrency in your wallet. According to the stats from the above mentioned images, the longer you wait, higher the value should go right ?

Wrong, There is no such thing as linear growth when it comes to cryptocurrency. It can go higher or lower at any instant. The price is affected based on the aforementioned factors.

profits 1953616 1280

So, It’s neither good or bad to invest on cryptocurrency for long term savings. Personally, I would say, Invest on banks, physical assets such as gold which have steady growth and there are very low risks associated with them.

I won’t say investing on gold is also safe, since in future, scientists may find a method to generate good amount of gold which would reduce it’s value ( Just imagine, It’s kinda impossible to generate gold artificially using any particle accelerator ).

So, Savings in bank are the good option right ?

Well, you can never predict anything. Even though saving in a bank is safer compared to cryptocurrency and stocks, it may be risky too. What if your bank declares bankruptcy ? . There is nothing you can do in this situation.

 

What I’m trying to convince ?

 

Just like the rule that started all this article, Here is another rule to divide the places to save your money. Store 60% of your savings on your bank. Store 20% on stock markets or mutual funds, store 20% of your money as cryptocurrency and Invest on cryptocurrency for long term savings.

 

Let’s say, Cryptocurrency prices gone down so much after you retire, Possibly you would lose all your savings which are 20% ( the worst case scenario ). Well, 20% is not a small number to ignore, 20% of 10,00,000 would be 2,00,000. So, What would be my final answer ?

 

Final verdict

Cryptocurrencies are a good investment for long term savings which are not so long, say 2-5 years. Even though you can store cryptocurrency as long as you want and generate profit, the risk associated with it is not good for long term.

If you are planning to save for your retirement, Cryptocurrency may not be a good investment. Choose a safe side so that you can lead a great life after you retire.

You can invest on cryptocurrency for long term savings while you have a job. Like, An average person would work at least 25 years. Invest on cryptocurrency when  you can recover from the loss it results in. You can earn the money you have lost in cryptocurrency, if you have a good job. Hence, I will recommend to invest on cryptocurrency when you have a job. If it is a retirement plan, choose something else.

 

Share your thoughts in the comments. If you loved the article, Sharing it with your friends won’t do any bad 😀

 

 

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Samba Siva is a student pursuing Bsc.Computer science and is highly interested in Cryptocurrency, web designing and Digital marketing stuff

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