Cryptocurrency is a relatively new type of investment, and it's an intriguing option for many people.
During the crypto boom earlier this year, many types of cryptocurrencies saw their prices skyrocket. The price of Bitcoin (BTC -0.01%), for example, soared by more than 100% between the beginning of the year and mid-April. Ethereum (ETH -0.64%) was up by nearly 250% in that timeframe, and the price of Dogecoin (DOGE 0.56%) surged by more than 3,000%.
While prices have fallen off since reaching their peaks, those incredible returns have made cryptocurrencies impossible to ignore. If you're on the fence about investing, there are two reasons you might consider buying now -- and two reasons you shouldn't.
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Why consider investing in cryptocurrency
1. It could potentially become mainstream someday
Cryptocurrency has the potential to become life-changing. It could become a mainstream form of payment someday, it could provide a way to hedge against inflation, and blockchain technology -- the foundation behind cryptocurrency -- could also have an enormous impact on how we do business.
If crypto does become mainstream, its price could soar to new heights. Bitcoin is currently priced at close to $44,000 per token, but some experts predict it may reach up to $500,000 per token someday. Depending on just how widely adopted cryptocurrency becomes, there could be a lot of earning potential for early investors.
Of course, nobody knows for sure whether it actually will become mainstream. But if you're the early adopter type and believe cryptocurrency has a shot at changing society as we know it, now may be the time to buy.
2. You'd rather risk losing money than live with "what if"s
Even if you're a cryptocurrency skeptic, there's one other reason to consider investing: You don't want to live with the regret of not buying if it becomes mainstream.
If you're undecided about whether to invest, picture two different scenarios. First, think about how you'd feel if you bought cryptocurrency now, but it ended up failing and you lost every dollar you invested. Second, consider how you'd feel if you opted not to invest, but it became a massive success and you missed out on those earnings.
For some people, losing money is the worst-case scenario. That's fine, and it means crypto probably isn't the right investment for you. But if you'd rather risk losing money so you don't have to live with the "what if"s down the road, you might consider investing.
Why cryptocurrency may not be right for you
1. It's a highly speculative investment
One of the greatest risks of buying cryptocurrency is that nobody knows what the future holds. Unlike stocks, cryptocurrency doesn't have a long track record. Bitcoin was launched just over a decade ago, and many other currencies are just a few years old. That's not much time to determine whether these investments will continue growing over the long term.
Even the experts are divided about its potential. Tesla CEO Elon Musk, for instance, has been a vocal supporter of both Bitcoin and Dogecoin, while Warren Buffett has famously voiced his disdain for cryptocurrency.
There is a chance it could become widely adopted someday, but it could just as easily fail. If you're a risk-averse investor, those odds aren't ideal.
2. It's extremely volatile
Even if cryptocurrency does succeed over the long run, it's still an incredibly volatile investment. This year alone, Bitcoin has already experienced a rollercoaster of ups and downs.
Bitcoin Price data by YCharts
While its price has started to recover from its most recent crash, Bitcoin is no stranger to volatility. The cryptocurrency has lost roughly 80% of its value in the past, and not all investors have the stomach for that much turbulence.
Whether or not you should invest in cryptocurrency depends on your personal preferences and tolerance for risk. If you're willing to take on more risk in exchange for higher potential earnings, cryptocurrency may be the right investment for you. But if you'd rather avoid the risk and volatility, there are plenty of other options out there.
