We recommend the best products through our internal review process and may receive compensation if you visit partners we recommend according to our advertising disclaimer.
Cryptocurrencies and digital currencies are making the headlines for their roles in the investment market. Recent analytics predict a dramatic rise to double the current price for popular cryptos like Bitcoin in 2022. However, only a few weeks into 2022, the price of bitcoin has plunged to less than $40,000. With this development, it’s no wonder many people wonder if investing in cryptocurrencies would be wise.
Cryptocurrency is a risky investment, but since its inception in 2009, the crypto market has proved more profitable than many fiat currencies. People invest in cryptocurrencies for various reasons, including some of the following.
A Diversified Portfolio
A diversified portfolio isn’t just about investing in stocks, bonds, technology, or foreign exchange. Adding a cryptocurrency to your portfolio helps you prevent volatility risks.
Cryptos serve as a haven against riskier investments. As an investor, you want your assets distributed into various sectors because each type of investment has different advantages, and a diversified portfolio will help you benefit from them all.
On the other hand, investors need to allocate capital into various financial sectors to reduce the exposure to any asset or volatility risks. They need to add some of the best cryptocurrencies to invest in, including Bitcoin and Ethereum. With cryptocurrencies, you can diversify your portfolio to maximize its growth.
Capital Appreciation
Despite the high volatility and unexpected fluctuations that characterize the crypto market, storing crypto for the long term has proven to have a consistently high value. Unlike fiat currencies with an unlimited supply in the investment market, cryptos have a limited supply, making it impossible to site their value through market inflation. In 2009, Bitcoin’s value was less than $1, but it is worth more than $40,000. Ethereum, which ranks second, is now worth $1550.
Huge Growth Potential
If anything, cryptocurrencies have higher liquidity than most assets like stocks and bonds. Since its entrance into the investment market, statistics have shown many digital currencies, like Bitcoin and Ethereum, increasing in value even with little investment capital. Their constant rise and fall in prices may seem alarming, but skeptics cannot deny their growth potential.
In 2018, Bitcoin’s value fell by 63%, or almost $70B. From 2018 to 2021, the market has experienced various price fluctuations. Despite this, cryptos have never failed to show their growth potential as the prices remain on an overall upward course. Even new investors are seeing the hidden liquidity potential of these digital currencies.
Generate Passive Income or Dividends
Investing in cryptocurrency also means you don’t have to wait long to increase profits. With a crypto portfolio, investors can also generate regular, passive income. How? By staking cryptocurrencies and the HOLDing scheme.
Staking cryptocurrency is also Called proof-of-stake (POS). In this investment strategy, you generate passive income by holding coins. Investors get to keep cryptos to verify transactions and support the network and, in exchange, earn rewards or interest in the form of extra tokens. An added perk of this method is that you enjoy annual returns between 1 and 5 percent, depending on the coin’s value when you stake.
On the other hand, the HOLDLing (Hold On for Dear Life) scheme allows you to generate dividends when you purchase digital coins directly to your wallet. However, this strategy does not work on all cryptocurrencies.
Decentralization of Money
Another reason you should invest in cryptocurrency is that it has a decentralized nature that lets you control your assets. The Federal government controls fiat currencies, US dollars, and various countries’ conventional currencies used in the financial market. Hence, the government determines what happens to these currencies.
The unlimited supply of government-controlled currencies makes them lose value quickly. However, even with increasing demand, the controlled supply of digital currencies means investors can enjoy capital appreciation from prevailing exchange rates while managing their funds without government interference. In essence, cryptocurrencies give you control to own and store assets without the involvement of third parties.
The lack of government control over cryptos can help lower inflation risk on assets as investors employ blockchain technology to safeguard their investments from market conditions, scams, and security breaches.
The Bottom Line
Ten years ago, most investors would have shunned the thought of cryptocurrencies in their investment portfolio. But, these days, it is as mainstream as stock trading and fiat currencies.
Cryptocurrency is an excellent inflation hedge. Although stock trading has lesser risk conditions than cryptos, investing in cryptocurrencies like Bitcoin and Ethereum will ensure a diversified portfolio, capital appreciation and growth potential, increased dividends, and personal control over your assets.
Some benefits of investing in cryptocurrency are that it offers you choice, independence, and the opportunity to control your future finances. Furthermore, cryptos’ decentralized and open-source nature eliminates the weak points of market inflation and government interference in the modern banking system.
Crypto investing made easy. Sign up for our free course and guide. Click here.
