In the last ten years, cryptocurrency has evolved from an unheard of technology experiment to a mainstream asset class. It started with Bitcoin’s meteoric rise, the explosion of altcoins onto the crypto scene all the way to decentralised finance and NFT’s.
Cryptocurrency has both amazed and confused investors around the world. But the big question is, is cryptocurrency a good investment or is it just a volatile gamble?
In todays blog we will break down the pros and cons of investing in cryptocurrency so you are able to decide for yourself whether it deserves a spot in your portfolio or not.
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What are the pros of investing in cryptocurrency?
- High potential returns: One of the biggest appeals of cryptocurrency is the possibility for massive returns in a relatively small amount of time. The most obvious example of this would be Bitcoin. In 2009, Bitcoin was almost worthless. Fast forward to 2025 and a single Bitcoin token is worth in excess of £60,000. Some of the altcoins on the market have delivered even more impressive returns in a much shorter period of time. For investors and traders who managed to time the markets correctly, cryptocurrency has been truly lifechanging.
- Diversification: Cryptocurrency is still viewed as a “new” asset class, disconnected from traditional markets. This means that investing in cryptocurrency could offer a diversification benefit within a more established portfolio. While there have been growing correlations with stocks in more recent times, cryptocurrency still behaves and reacts differently to certain global events. This helps offer the investor an alternative source of investments away from traditional stocks and banking policies.
- Transparency and security: Almost all cryptocurrencies operate on blockchain technology, this is a decentralised “ledger”. This makes all transactions done in the crypto space both transparent and secure. Every single transaction completed is recorded and immutable, making fraud and manipulation a lot more difficult than using the traditional methods. While the use of exchanges and wallets can be vulnerable, if they are used correctly they are considered to be one of the most secure ways of protecting your assets.
- Constant innovation: When an investor decides to add cryptocurrency to their portfolio, they are not just buying “coins” or “tokens”, they are purchasing a piece of technology. From smart contracts to decentralised applications the blockchain is powering a new wave of technology, a new wave of innovation across just about every industry on the planet.
What are the cons of investing in cryptocurrency?
- High market volatility: The crypto market are well known for being incredibly volatile. Prices can change by double digits in a matter of hours, often without giving any signs or clear reasoning for doing so. A single statement from a high-profile person or a sudden announcement about a change in regulations can send a cryptos price sky high or bring it all the way down to rock bottom. While with this volatility comes opportunity, it can also bring significant risk to investors, particularly investors that have little or no experience in the crypto space.
- Security risks and scams: While there is no denying that the blockchain itself is secure, the whole crypto market has seen numerous hacks, scams and rug pulls in recent years. Crypto exchanges have been compromised resulting in users losing millions of pounds worth of assets to phishing attacks while other projects have raised millions in funding and have simply vanished. Without the protection that traditional finance has (such as the FSCS protection within the UK) investors still need to be cautious when approaching anything in the crypto space.
- Lack of clear valuations: Unlike traditional assets, such as stocks and bonds, cryptocurrency doesn’t have company earnings, interest rates or economic indicators. The value of any given cryptocurrency is currently largely dependant of supply and demand, market sentiment and speculation. This makes it harder for investors to determine a cryptos true value and whether they are over-paying or under-paying for any particular asset.
- Environmental concerns: Cryptocurrencies, most obviously Bitcoin has often come under criticism for its impact of the environment. The energy used in the process of “mining” for Bitcoin, among other cryptocurrencies has raised concerns with many environmentalists and various policy makers. While many newer cryptocurrencies, such as Ethereum have moved away from the mining model, the industry has still come under scrutiny in recent years.
Crypto Analyst‘s Final Thoughts.
Like any investment you would consider, whether you add cryptocurrency to your investment portfolio depends on your own individual goals and what you are willing to risk. If you are happy with high risk, high reward opportunities and are able to stomach to volatility of the crypto markets, it may very well be worth exploring.
As with traditional investments, you should never invest more than you can afford to lose. Unlike traditional assets, crypto is still new and based largely on speculation. Doing your own research before investing in any cryptocurrency is a must, keeping your assets properly secure is also vital to succeeding in the crypto space.
Cryptocurrency presents potential investors with an exciting opportunity. There is no dismissing cryptocurrency anymore, as many larger investors and hedge funds are starting to realise it is here to stay.