Twitter has undergone many changes since Elon Musk bought the company last October. Be it the new blue payment label or the recent changes in the algorithm, the social network has caused controversial moments for their users. But the latest controversy goes beyond 280 characters and lands on the digital coin world, affecting finances in a more direct way.
This time the CEO of the platform has decided to change the iconic blue bird logo and replace it with the Dogecoin icon, a cryptocurrency/digital coin created in 2013 whose logo is a Shiba Inu dog. This has caused a stir among users, who have expressed their opinions on the matter. Some of them have welcomed the change, while others have criticized it for being too risky and not in line with the company's mission.
It is not a secret that Elon Musk has always been a vocal supporter of Dogecoin, a highly volatile cryptocurrency whose price has skyrocketed from $0.0002 in 2017 to $0.096 by April 2023, representing an increase of more than 45000%. In January 2022, Musk used Twitter to announce that Tesla would accept Dogecoin as payment for its products and services, further boosting the coin's popularity.
Musk advocating for Dogecoin to be a payment method of such an exclusive product encourages other companies to adopt digital coins, representing an increment of users and investors at the same time. This popularity among investors has grown recently, with the collapse of several banks which has spread a sentiment of uncertainty and fear in the financial sector. While there are potential benefits to investing in cryptocurrency, it's important to understand the risks and rewards involved in it.
Here are four reasons to jump in cryptocurrency and three reasons to hold off:
Pros 👍🏻
1. Low fees 🤩 - Transaction fees of digital coins tend to be much lower than those associated with traditional banking or stock trading. We can see an example with NANO, a cryptocurrency first launched as RaiBlocks (XRB) in 2014. The NANO network transactions are fee-less and fast to exchange, being an attractive alternative for those looking to save money on their investments and minimize fees.
2. Decentralization 📊 - Cryptocurrencies are forms of digital cash (Bitcoin and Ethereum being the two most common). The nature of their process is decentralized since it runs on blockchains. Anyone can run a cryptocurrency miner or stake to earn new coins, and this can be done from any country. At the same time, anyone can create a new version of the currency through forking. Since cryptocurrencies are not controlled by a single entity or government, they are less susceptible to manipulation or interference.
3. High Volatility 🧨 - The price of a cryptocurrency can fluctuate significantly over short periods of time, creating opportunities for investors who are willing to take a risk in order to reap great rewards.
4. Accessibility 🅰️ - Anyone with an internet connection and a digital wallet can access cryptocurrency, making it easy to buy and sell online.
Cons 👎🏻
1. Again, High Volatility 💣 - As mentioned above, cryptocurrencies can be highly volatile, which could lead to losses if you’re not careful with your investment strategy. We can talk again about Dogecoin again because it has no limit on the number of tokens that can be produced. This makes the currency vulnerable to devaluation as supply increases.
2. Security Risks 📉 - Since cryptocurrencies rely on cryptography for security, they may be vulnerable to hacking attempts if proper security measures aren’t taken when storing crypt online in a digital wallet or offline in a hardware wallet (ledger).
3. Limited Use Cases 💼 - While cryptocurrencies have become increasingly popular as an investment option, they still are viewed as having limited utility outside of trading due to their lack of widespread acceptance as a payment method.
However, more companies are implementing tokens or digital coins as part of their daily processes. Such is the case of Lingo, a Web3 startup that rewards its community with vacations. Every time a user purchases a token they get rewards like miles and points to use towards their next vacation.
Lingo also compensates for the instability of cryptocurrency by leveraging blockchain technology and real estate collateral, which cushions the downside risk without pegging the token to its value, which still allows exposure to the upside potential.
Investing in cryptocurrency can be rewarding, but it's important to approach it with caution and do research before making any decision. How will you monitor your crypto investments and adjust your strategy to adapt to current market conditions?
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