Reasons to Invest in Cryptocurrency
Cryptocurrencies have grown in popularity due to the decentralisation ideas they promote, as well as the possibility for significant returns. Still, their volatility continues unabated, and these assets have a higher risk of loss than many conventional currencies. In 2017, for example, Bitcoin values surged from approximately $1,000 to over $19,000 until falling to around $3,000. Then, until the end of 2020, Bitcoin surged dramatically, almost hitting $60,000 before plummeting below $30,000 in the summer of 2021. Many bitcoin investors found a new hope to invest.
Cryptocurrencies offer several advantages, such as seamless operations and inflation prevention, and many traders are incorporating them into their varied portfolios.
This post covers why many people consider using their money to invest in crypto.
NOTE: DO NOT CONSIDER THIS AS INVESTMENT ADVICE!
What is Cryptocurrency?
Cryptocurrency is not physical money like the paper/plastic notes and metal coins we are used to (read: fiat currencies). It is a form of digital "money" generated by computers and, usually, used over the internet. It is controlled and monitored by blockchain technology and, in most cases, operates independently of third party involvement. Most cryptos aren't controlled by a central system like a bank or other authority. Crypto is secure and trustworthy because everything that happens on the blockchain is recorded in a public ledger, so anyone can see what is happening.
In a nutshell, cryptocurrencies are virtual assets represented in terms of digital "tokens" (aka coins).
Cryptocurrency is an intriguing industry to engage in. Still, with the fast-changing nature of the market in terms of trends and volatility, one should always do due diligence and research before investing. Also, keep in mind that you must continually be aware of new market information, relevant news and regulations. Trusted news sources like TheTopCoins, Coindesk, or Cointelegraph provide accurate information and news to keep you updated about the market.
Classes of Cryptocurrency
Before buying crypto, familiarise yourself with its many forms and determine your requirements because each has its merits and disadvantages. This way, you can decide what cryptocurrency is best for you to buy.
Payment cryptocurrencies are digital currencies managed by a decentralised computer network using blockchain technology. Some cryptos attempt to contend with fiat money, while others focus on crypto transactions for a particular use case or sector.
Bitcoin, the first digital currency, is an excellent example of a payment cryptocurrency because it was created as a substitute for existing fiat currency systems. On the flip side, its volatility may make it less desirable for buying goods and services, and a stablecoin may be better for this purpose.
Utility tokens primarily pay for executing applications on a blockchain network or the right to use a product/service. As Janine Yorio says, utility tokens are like chips in a casino. Utility tokens are used in an ecosystem.
For example, ETH is the crypto asset native to the Ethereum network, and it's classified as a utility token since it's required to develop and operate Ethereum-based dApps.
This type's value comes from tradeable assets external to blockchain networks. They're designed to be investment tokens and are subject to strict regulation (and rightly so!). Usually, they represent ownership of company shares. Again referencing Janine Yorio, Security tokens are like owning shares in the casino itself. Security tokens give you ownership in an ecosystem.
Should I Invest in Cryptocurrency?
By now, you have at least a basic grasp of cryptocurrency and recognise the different classes; however, you may be asking yourself the following questions:
- Is investing in cryptocurrency risky?
Yes, of course! As are all forms of investment.
- Is it too late to invest?
A wise person once said, "the best time to plant a tree was yesterday. The second best time is now."
- Is investing genuinely worthwhile?
- *Insert 5,079,256 other questions here*
Let us further address these concerns before explaining some reasons to invest in crypto.
To begin with, yes, cryptocurrency has inherent investment risks due to volatility etc., but there are many ways to mitigate possible risks. For example, keep up to date with crypto news sites. Thoroughly research the cryptocurrencies of interest to you. Ask trusted experts and registered financial advisors. Never trust any person or crypto project/trading platform/scheme promising you guaranteed returns. It IS NOT possible to ensure crypto returns! We have a guide on avoiding crypto-related scams if you're interested.
Second, investing in cryptocurrency is never too late. Every day, the cryptocurrency market grows in overall value, demonstrating how beneficial it remains. If you believe that all of the money has already been made in crypto, you are mistaken.
Finally, by observing cryptocurrency market movements, news, and trends, and avoiding shitcoins, investing may become profitable for you too.
Consider The Following Five Reasons to Invest in Cryptocurrency
1. High Liquidity of Cryptocurrency
If you're thinking about investing in the crypto market, you've probably looked at the current stock market statistics; isn't it true they appear promising? The value of many cryptocurrencies has gradually increased over the last several years. Bitcoin and Ethereum, two of the most popular cryptocurrencies, have continuously shown positive overall outcomes, demonstrating their value. The gains made by bitcoin alone have been incredible.
Cryptocurrency and blockchain technology is piquing the curiosity of everyone, particularly millennials recently. As said, youth determine the future, and their participation aids the industry's growth.
Investments in online crypto trading (and many other online services) surged significantly during COVID-19, with many confined to their homes. As a result, the liquidity of cryptocurrencies increased.
Even though cryptocurrency regulations differ considerably from country to country, crypto is extremely simple to get started in. All you have to do is purchase some coins, keep them in your crypto wallet and then sell them when the prices rise (unless you're a HODLer ;) ). And you can go as simplistic or complex as suit you when it comes to market watching to buy and sell at the most advantageous times.
If you visit BitPrime's All Coins page, you see we display both the 24-hour price change as a percentage as well as a historical price graph. Hovering over the graph displays more info, or you can click on the coin's name (under the "Product" column) to be taken to that coin's specific page, where you can view the graph much larger (third tab in the table at the bottom of that page).
2. Self-Sufficiency and Adaptability
In a significant sense, the crypto market is autonomous and independent. These days, users focus on DeFi (Decentralised Finance) to provide more distributed and P2P (peer-to-peer) connectivity in trading cryptocurrency.
Stand-alone trading platforms and wallets with user-held private keys give users total authority over their activities with no outside influences on their holdings or trade.
3. A Multitude of Options to Invest in
When you think of investing with any platform, the more cryptocurrencies they offer, the better your diversification can be. There are already over 12,000 cryptocurrencies in circulation. You have the option of placing your investment in any of these. The cryptocurrency market grows with new coins developed every day.
Of course, bear in mind that just because there are 12,000 or so created, it doesn't mean that they are all sensible investment options! Once again, do your due diligence and learn more about the project.
You don't have to put yourself in a riddle by reading about all 12,000, either! It's much easier to filter your selection down to the top. Many investors prefer the top five to ten cryptocurrencies, but you may always look at others.
Learn about their purpose, the team behind them, the pros and cons other crypto-fanatics have discussed (Reddit can be helpful for this), past pricing history and future price predictions etc.
Determine your requirements and sort out the matched coins that suit your needs. Don't only buy just one currency (unless you're a die-hard fan, and that's what you want to do). Often, it's not a good strategy if you put all your eggs in the same basket. Most investors recommend diversification.
4. Future Scopes of Crypto
The principal argument for investing in cryptocurrencies is because they have promising potential. Every day, the realm of cryptocurrency witnesses new leaps and bounds. The cryptocurrency markets are seeing massive changes as a result of both downward and positive forces.
The beauty of blockchain technology is that continuous upgrades occur. DeFi, as we have mentioned, is a game-changing pivotal point in the evolution of digital money. And the development of new (improved?) distributed networks is always underway.
Incorporating new technology into financial institutions, such as Central Bank Digital Currencies (CBDCs), may cause crypto values to skyrocket.
Several nations already use cryptocurrency as a kind of alternative money. Many countries are experimenting with mechanisms to manage and legitimise digital currencies.
5. The Entry of Enterprises
Many large businesses and sectors are beginning investment in cryptocurrency and use it to make payments. As a result, it is providing the crypto market with a boost and assisting it in growing. You wouldn't want to be out of the industry if/when it makes a considerable rise.
Wall Street has also entered the crypto realm, finally seeing it as a legitimate and efficient transaction method. Another well-known brand, Tesla, has poured billions of dollars into Bitcoin (then out, and then back in again 😉).
Large and powerful corporations play a crucial role in the evolution of virtual money, with many institutional investors beginning to use crypto.
Many businesses are considering cryptocurrency mining as a viable alternative investment. If you don't necessarily want to invest in cryptocurrency trading, you might check out mining instead. Though, if new to cryptocurrency, we don't recommend diving straight into mining without thoroughly researching it first.
A Brief Summary of Crypto Investment Do's and Don'ts
- Do increase your understanding of crypto wallet security best practices.
- Do always research everything. There are many rumours and prejudice on different cryptocurrencies; people have misconceptions, wrong judgements, wrong predictions etc. Read experts' articles, predictions and, ultimately, form your own conclusions. Here are some helpful crypto research tips and strategies.
- Don't fall for scams. Avoid scams by following our suggestions.
- Do remember, if it seems too good to be true, it probably is. I say this concerning the many scammy trader-bot-type platforms, ICO scams, and other conscienceless scumbags out there.
- Do understand how supply and demand affects a cryptocurrency's liquidity and stability (just Google Elon Musk and DOGE for an example!). The more interest and community support for a coin, the more profitable it may be for investors.
- Don't make these common beginner's mistakes.
- Do learn about relevant cryptocurrency regulations and make sure that service providers are following local laws. Being a relatively new asset class, the rules regarding crypto are constantly changing worldwide.
- Do make sure you are purchasing from a trusted platform such as BitPrime (a very shameless plug). This guide covers what to look for in a crypto trading platform.
In a world of 7.8 billion people, there are about 120 million cryptocurrency traders. Although popularity is quickly increasing, there is still room for more crypto investment. The cryptocurrency market capitalisation is worth less than 2% of the global stock market valuation of over $100 trillion. So, for most traders, joining on any day will suffice, but always research, research, research first.
A notable aspect to consider while buying today is predicting which cryptocurrencies will survive in five, ten, 20 years. Bitcoin, Ethereum, Bitcoin Cash and other huge market cap currencies have a better likelihood of surviving, potentially making them safer first choice investments.
One should always try to keep up with technological advancements to avoid falling behind. In the future, cryptocurrency is very likely to be the preferred payment method in one form or another. Many retail investors (read: everyday people) want to make cryptocurrency investments but are afraid to take the initial step. If you're one of them, don't worry; start small, ask for help from those who know what they're doing, and once you've taken the first step, keep on learning.
Hopefully, this article has explained a few reasons to invest in cryptocurrency. As always, if you need more help, check out our Knowledge Base and Blog section for a plethora of handy hints and articles covering different aspects of both cryptocurrencies and blockchain technology.
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 12/10/2021