Is it worthwhile to invest in cryptocurrencies? Experts examine the concept of ‘financial literacy.’
Because of the exponential growth of isolated altcoins like DOGE and SafeMoon, CRYPTOCURRENCIES have drawn a slew of new investors in 2021. Is it worthwhile to invest in cryptocurrencies?
Following an unexpected surge in the value of various alternative tokens, cryptocurrency investment became widespread this year. Elon Musk, the CEO of Tesla, has spent a lot of time promoting Dogecoin, which has grown by more than 4,000 percent in the previous several months, and has dragged his large following into the market. Experts, on the other hand, have questioned whether these currencies are a good investment and whether backers have the necessary skills to navigate the market’s increasing volatility.
The bitcoin industry has been branded the “new Wild West” by politicians in the United States.
Over the last decade or so, currencies such as Bitcoin and others have snuck into the existing unregulated market.
Among the first investors were programmers, developers, and those who understood the currency’s purpose.
People who become interested in altcoins as they become more mainstream, on the other hand, will do so with less knowledge.
Experts have recently validated this, with studies showing that “financial illiterates” are more likely to invest in cryptocurrencies.
The Bank of Canada’s 2019 Cash Alternative Survey debuted in August last year, when the latest coins were still on the outskirts.
Financial literacy, which the bank defines as a fundamental understanding of investing and saving, was found to be positively connected with cryptocurrency awareness.
Those with a lower level of financial literacy, on the other hand, are twice as likely to invest.
According to the bank, 8% of persons with low financial literacy would invest, compared to 4% of those with higher financial literacy.
The association was observed in other nations, including the UK and the US, in a similar analysis published by ING’s Think Forward Initiative earlier in 2020.
“A big chunk of the bitcoin market [is made up]of novice investors with limited financial literacy skills,” they found.
“These investors are more prone to overestimate the potential rewards of cryptocurrencies while underestimating the danger of related investments.”
In other words, while cryptocurrencies may provide some short-term profit, the market may only be worthwhile for those with financial expertise.
Many people who aren’t well-versed in the industry have discovered that cryptocurrency bites back.
People will require some education on the unique and very volatile market on their own, in addition to financial understanding.
Recent years have seen the emergence of so-called “pump and dump” schemes. “Brinkwire News in Condensed Form.”