1. Every individual should save money for their bright future. If you are
one of those who spends literally every penny you earned, You are making
a huge mistake. Based on my opinion, I would say that 50/30/20 rule works
absolutely on another level.
The rules states that “For every 100 you earn, Spend 50 percent on your
monthly expenses and needs, Save 30% for short-term savings that may help
you when you need money in emergency situations such as medical problems
and stuff, Save 20% for your future so that you can lead a good life
after your retirements.
Even though many people doesn’t agree with this rule, I would say, you
can edit the rule something like 60/20/20 so that you won’t have to give
up your current life. Well, enough of these sayings, I want to talk about
the last 20% of the income.
As I already said, the remaining 20% would be saved for long-term
purposes. So you have to store the money safely so that you can withdraw
it after you retire. Obviously you can store the money in a bank. But, If
you are a risk-taker like me, who likes to invest the money on some
assets like Gold, stocks or Cryptocurrency, which one would be the best ?
So, Here comes the main topic of our article, Should you invest on
Cryptocurrency for long term savings or is it better to stay away from
cryptocurrency ?
The Price Fluctuation Factors Of Cryptocurrency
Cryptocurrency for beginners
Before, we answer our main question, we should know, Why one should even
invest on cryptocurrency. Well, As I explained in the Cryptocurrency for
dummies article, The price of cryptocurrencies keep changing from time to
time. Here, The time can be years, Months, Weeks, Days or even hours. So,
Why does the price of cryptocurrency fluctuates ? . Well, We will write a
detailed guide on this topic later. But, for now, here are a few :
Availability: Even in the real world, When something is rare, The value
of that thing goes high. Let’s take Diamond, Due to it’s rarity, The
value of the metal is so high. Just like that, Cryptocurrencies value is
determined by the rarity of the coin. If the coin is available so easily,
the price would be low. If it is rare, Obviously, The price would be
higher.
Demand: When a cryptocurrency like Bitcoin, ETH or Dash suddenly gets
mentioned on Forbes that their prices are being skyrocketing or drowning
to the grave, People starts investing on the coins. This suddenly
increases the demand of the coin. When the demand outperforms
availability, That’s when the prices starts to grow. Again, demand and
availability are connected to each other
Big Whales: A popular theory suggests that, Some big people hold huge
amounts of a specific cryptocurrency which they slowly release on to the
market. When they release low amounts of coins to market, due to the
aforementioned demand, The prices starts to grow. If they release more
coins, The prices goes low.
In case you haven’t observed, All the aforementioned factors are
connected to each other. One factor can easily affect another, so the
prices would keep fluctuating. We will definitely talk about this topic
2. later on. So, let’s move on to our main topic “Should you invest on
cryptocurrency for long term savings ?”, shall we ?
Should You Invest On Cryptocurrency For Long Term Savings ?
As you already know, why the prices keep changing in cryptocurrency
market, you should now think whether it is a good idea to start investing
on it. Here comes the problem, It is not easy as it seems. The answer can
be right and wrong at the same time. Well, Don’t worry, I will explain
it.
We can never actually predict the prices of cryptocurrencies accurately.
Here is the price history of a popular cryptocurrency Bitcoin. Bitcoin
now costs a whooping 7,00,000 INR approximately. Was bitcoin priced
around 7 Lakh Rupess all the time ?
Bitcoin starting priceTaken from Wikipedia
As you can see, The price of Bitcoin in 2010 is $0.03. No one would have
thought that the value of the bitcoin will raise so much that they can
buy a car with 1 Bitcoin in 2020.
Bitcoin price in 2017
Taken from Wikipedia
As you can see in the above image, The price of bitcoin in February 2018
is about $6,000. Just imagine from being a zero to hero. Even though it
took a lot of time to grow from $0.003 to $6,000, it is negligible
compared the profit one can generate with patience and good prediction
skills.
Here comes the problem, again in the same image, You can see that the
price dropped again in December of 2018, from $6,300 to $3,300, which is
almost half the price. That’s why, Cryptocurrencies are associated with
huge risks. The price of any cryptocurrency can never be perfectly
predicted.
Luckily, there is no limit on how many years you can store cryptocurrency
in your wallet. According to the stats from the above mentioned images,
the longer you wait, higher the value should go right ?
Wrong, There is no such thing as linear growth when it comes to
cryptocurrency. It can go higher or lower at any instant. The price is
affected based on the aforementioned factors.
profits 1953616 1280
So, It’s neither good or bad to invest on cryptocurrency for long term
savings. Personally, I would say, Invest on banks, physical assets such
as gold which have steady growth and there are very low risks associated
with them.
I won’t say investing on gold is also safe, since in future, scientists
may find a method to generate good amount of gold which would reduce it’s
value ( Just imagine, It’s kinda impossible to generate gold artificially
using any particle accelerator ).
3. So, Savings in bank are the good option right ?
Well, you can never predict anything. Even though saving in a bank is
safer compared to cryptocurrency and stocks, it may be risky too. What if
your bank declares bankruptcy ? . There is nothing you can do in this
situation.
What I’m Trying To Convince ?
Just like the rule that started all this article, Here is another rule to
divide the places to save your money. Store 60% of your savings on your
bank. Store 20% on stock markets or mutual funds, store 20% of your money
as cryptocurrency and Invest on cryptocurrency for long term savings.
Let’s say, Cryptocurrency prices gone down so much after you retire,
Possibly you would lose all your savings which are 20% ( the worst case
scenario ). Well, 20% is not a small number to ignore, 20% of 10,00,000
would be 2,00,000. So, What would be my final answer ?
Final Verdict
Cryptocurrencies are a good investment for long term savings which are
not so long, say 2-5 years. Even though you can store cryptocurrency as
long as you want and generate profit, the risk associated with it is not
good for long term.
If you are planning to save for your retirement, Cryptocurrency may not
be a good investment. Choose a safe side so that you can lead a great
life after you retire.
You can invest on cryptocurrency for long term savings while you have a
job. Like, An average person would work at least 25 years. Invest on
cryptocurrency when you can recover from the loss it results in. You can
earn the money you have lost in cryptocurrency, if you have a good job.
Hence, I will recommend to invest on cryptocurrency when you have a job.
If it is a retirement plan, choose something else.
