It's no secret that cryptocurrency is one of the hottest investments of the past year, but it's also incredibly divisive and controversial.
While some believe crypto is a revolutionary technology with the potential to change the world, others worry it's overhyped and destined to crash. In truth, nobody knows for certain what the future holds for crypto. But there are a couple of reasons why right now could be a smart time to buy -- and one reason it's best to avoid it for now.
Why now could be the best time to buy crypto
1. It could potentially be a lucrative investment
As controversial as cryptocurrency can be, it does have plenty of potential. Ethereum (ETH 2.33%), in particular, has been gaining traction as a platform for non-fungible tokens (NFTs) and decentralized finance (DeFi) -- two of the fastest-growing segments of the crypto market.
Some investors also believe Bitcoin (BTC 0.25%) could be a strong hedge against inflation, even dubbing it "digital gold." While it's uncertain right now whether Bitcoin will be able to live up to that name, it has been steadily gaining acceptance among merchants, individuals, and institutional investors alike.
While the crypto market as a whole has taken a beating over the past couple of months, that could make right now a smart opportunity to invest. If cryptocurrency does end up becoming the next big thing, now could be your best chance to buy when prices are lower.
2. You won't have to live with regrets if crypto succeeds
It's easy to look at the most popular investments and think about how much money you would have made had you invested earlier. What if you had bought Amazon in the late 90s? What if you'd invested in Tesla five or 10 years ago?
Currently, Bitcoin is priced at around $44,000 per token. Some experts predict it will reach $100,000 or more within the next few years, however. Those who are even more optimistic believe it could reach at least $500,000 per token someday.
Of course, whether it can actually reach those prices is impossible to know right now. But consider how you would feel if Bitcoin's price did skyrocket and you chose not to invest.
This doesn't mean you should buy every high-risk, high-reward investment to avoid living with regrets. But consider the situation from both sides. Would you be more upset about losing the money you invested if crypto fails, or watching crypto succeed knowing you didn't invest?
If it's the latter, it may be worthwhile to invest a little money you can afford to lose. If crypto ends up failing, you can at least say you gave it your best shot.
Why it may be better to avoid crypto for now
1. It's still highly speculative
Despite all the hype and the experts predicting where prices will be in a few years, nobody really knows whether cryptocurrency will succeed or not. Even the strongest cryptocurrencies with the most real-world uses aren't guaranteed to still be here in a decade or two, which makes this a risky investment.
If you're a risk-averse investor or simply don't have cash to spare on an investment that may or may not pay off, crypto might not be the best fit for your portfolio right now.
Keep in mind, too, that this could change in the future. Just because crypto is speculative right now doesn't mean it always will be, and if it develops more utility down the road, you can always invest later. You may not see monumental gains like you would if you'd invested earlier, but you're also less likely to lose money.
Cryptocurrency could be a lucrative investment, but it's not right for everyone. Before you buy, consider your risk tolerance and how much you can afford to lose. With a little research and preparation, it will be easier to determine whether crypto is a good fit for your portfolio.