Cryptocurrency: Worth the risk?

One tweet or video can boost or plummet the prices of crypto stocks. Volatile yet in-demand, what to expect as a cryptocurrency investor.

Faith of the finances invested into Dogecoin relies heavily on Elon Musk’s Twitter (https://www.youtube.com/watch?v=bHfdoxtt2xs)

Elon Musk recently appeared as a guest-host in an episode of NBC’s Saturday Night Live, which is one of the most popular comedy sketch shows in the history of American television. In a segment of this show, Dogecoin, which is a cryptocurrency created by two software engineers as a joke but has gained considerable momentum, especially after endorsements from Musk himself, was referred to as a “hustle” by Musk, which was a clever attempt to replicate the youth lingo. Still, it ended up backfiring for the dogecoin investors. It is already unsettling enough to hear a 49-year-old billionaire make such a choice of words; apparently, it did not sit right in the cryptocurrency market as well. After the segment, dogecoin fell by around 35% to reach just 0.47 against the US Dollar.

This is not the first time Musk’s tweets have impacted cryptocurrency. In fact, there have been multiple tweets by Musk which caused both the rise and the fall in the value of cryptocurrency.

This, however, is not a problem of Musk’s influence over cryptocurrency but more to the point of how volatile this currency is and how dangerous it can be to invest in it.

This volatility is dangerous for the investors, but it is also dangerous for the future of cryptocurrency because such volatility would cause people to not invest in cryptocurrency in the future. On top of this, cryptocurrency is not subject to US securities law which means that it is a potential hotspot for frauds and manipulation. Another testament to the volatility of this currency is the fact that consumers were scammed out of around 2 million dollars by Musk impersonators on Twitter alone.

Many people continue to put their faith into cryptocurrency investments despite their risks, but what does the future hold, and what can be done to deal with the problems that come with investment into this currency?

From an investor’s point of view, it is important to know when and how much to invest into a currency that is as fast-changing and unregulated as bitcoins; however, this volatility is also something that can benefit the investors as there is potential for higher returns than a normal currency as well as more protection from payment fraud. However, investors should also be ready for large losses for short periods of time and the dip to be higher than a normal currency in the market. Investors should also be aware and equipped with all the necessary measures to secure any investment being put into this currency, including not holding a high amount of digital currency on digital currency exchanges and using USB drives as a “physical token” for the coins being invested in.

From a market point of view, as retail investments increase into cryptocurrency, we can expect government interventions and regulations to be implemented in the near future. This might also curb the volatility of the currency, which makes it a safer investment and strips it off of its USP, which is expectations of high returns compared to other forms of transactions.

The rise in the popularity of cryptocurrency shows how alternative transaction methods are gaining momentum, which is faster than the current transactions, especially when it comes to international transactions. If this trend continues, we can see cryptocurrency replacing most online transactions and inner-government exchanges in the not-too-distant future. If that happens, we should also brace ourselves for a whole new set of challenges that comes with it, both in terms of financial and national security.