Advantages of cryptocurrencies
Now we come to the disadvantages of passive index funds:
- Decentralization & security against manipulation:
The majority of cryptocurrencies are based on decentralization. They are therefore independent of central bodies, institutions, and states. This means that they cannot be influenced or manipulated by a central authority.
- Sovereignty and personal responsibility:
The sovereignty of cryptocurrencies lies with the owner. Cryptocurrencies cannot be confiscated and so the owner has sole control over the “money”. - Algorithms and code:
The basis of cryptocurrencies are algorithms and program code. This gives cryptocurrencies traceable properties. This can relate, for example, to monetary policy aspects such as supply or the inflation rate. - Transactions & Transparency:
Both the cost and speed of transactions are advantageous with cryptocurrencies. Transactions take place at low cost and are processed worldwide within a few seconds to minutes. - Price and volatility:
The crypto currency market is still relatively young. In comparison to stocks, many cryptocurrencies offer high price potential, provided that you invest in a promising project. - Anonymity & traceability:
Transactions of different crypto currencies have a different degree of anonymity. While Bitcoin is pseudo-anonymous due to the transparency and traceability of the transactions, crypto currencies like Monero are completely anonymous and like digital cash.
Disadvantages of cryptocurrencies
Now we come to the disadvantages of passive index funds:
- Decentralization & security against manipulation:
The property of decentralization is equally a disadvantage. For many people it is difficult to imagine, especially from a monetary policy perspective, to trust a currency that is not directly issued and regulated by the state. - Sovereignty and personal responsibility:
Sovereignty and personal responsibility: Sovereignty means personal responsibility. There is no deposit insurance and no state protection. So if you lose access to your digital wallet, you also lose your cryptocurrencies. - Algorithms and code:
there is one or more people behind a program code. Errors are human and in this respect errors can also arise in the program code of a cryptocurrency. This can lead to faulty functions and undesired failures. - Transactions & Transparency:
Transactions in cryptocurrencies are irreversible. One speaks of irreversibility. Since they cannot be booked back, the sender must therefore act with particular care. - Price and volatility:
The volatility of many cryptocurrencies is significantly higher, especially compared to stocks. Volatility is an opportunity and a risk at the same time. An investment in digital currencies is risky and the development of the exchange rate can fluctuate very strongly. Be aware of this fact. - Anonymity & traceability:
The high degree of anonymity of Monero and other “privacy” coins makes them repeatedly the target of regulatory authorities. They violate anti-money laundering guidelines and could therefore be banned.
Here are the disadvantages of cryptocurrency in India, 10 benefits of cryptocurrencies, Advantages of cryptocurrency investment, Advantages and disadvantages of cryptocurrency PPT
