Are cryptocurrencies a good investment?

Temps de lecture : 4 minutes

With cryptocurrency investments in 2021, it will be possible to become rich. The downside is that you can lose all the money you’ve invested.

Both questions are true, investing in cryptoassets can be risky, but they can also be extremely lucrative.

Cryptocurrencies are a good investment if you want direct exposure to the demand for digital currencies. Shares in companies with exposure to cryptocurrencies are a safer but potentially less lucrative alternative.

Are cryptocurrencies safe?

Crypto-currencies aren’t totally safe, at least not yet. On the other hand, there are other indications that they’re here to stay.

Risks related to cryptocurrencies

Unlike stock exchanges, cryptocurrency exchanges are more susceptible to hacking and other criminal activity.

Investors who have had their digital currencies stolen have suffered significant losses as a result of these security flaws.

Cryptocurrencies require more security than stocks or bonds when stored.

Bitcoin (crypto: BTC) and Ethereum (crypto: ETH) can be bought and sold on cryptocurrency exchanges such as Coinbase (NASDAQ: COIN).

Many people prefer not to store their cryptoassets on exchanges because of the risks of cyberattacks and theft.

It’s becoming increasingly common for cryptocurrency users to choose offline “cold storage” options, such as paper or hardware wallets, but cold storage has its own challenges.

Essentially, it’s impossible to access your cryptocurrency without your private key, which is the biggest risk.

Investing in a cryptocurrency project doesn’t guarantee success

Cryptocurrency projects are subject to fierce competition, and there are also countless fraudulent projects in the sector. In the end, only a limited number of cryptocurrency projects will prosper.

Cryptocurrencies may also be subject to coercive measures by regulators, especially if governments see them more as a threat than an innovation.

What’s more, cryptocurrency technology is cutting-edge, which increases the risk for investors.

This is still a work in progress, and has not yet been thoroughly tested in real-life environments.

Adopting cryptocurrencies

Although cryptocurrencies and the blockchain industry carry inherent risks, they have developed considerably over time.

Increasingly, investors are able to access custodial services at institutional level, thanks to the development of an indispensable financial infrastructure.

Crypto-assets are becoming increasingly affordable for individuals and professionals alike.

Several companies are becoming direct participants in the crypto-currency sector by creating crypto-currency futures markets.

Several financial giants, including Square (NYSE: SQ) and PayPal (NASDAQ: PYPL), facilitate the buying and selling of cryptocurrencies on their platforms, while others, including Square, have collectively invested hundreds of millions of dollars in bitcoin and other digital assets.

Cryptocurrencies are good long-term investments, but what about the short term?

When launching cryptocurrencies such as Bitcoin and Ethereum, high targets are often set, which will be achieved over time.

While no cryptocurrency project is guaranteed, if successful, early investors could reap significant rewards over time.

To be considered a long-term success, cryptocurrency projects need to be widely adopted.

Long-term investment in bitcoin

Due to its great popularity, bitcoin is the best-known crypto-currency, benefiting from the network effect: more people want to own bitcoin since the majority of them do.

Some investors consider bitcoin to be “digital gold”, but it can also be used as a digital currency.

It is estimated that the supply of bitcoins will never exceed 21 million coins, compared to currencies controlled by central banks. fiat currencies continue to depreciate, which will increase the value of bitcoin.

Many bitcoin enthusiasts believe that bitcoin can be widely used as a digital currency in the long term, and will therefore become a truly global currency.

Bitcoin has the following important characteristics:

– Blockchain technology, which underpins crypto-currencies such as bitcoin, enables data to be sent securely across cyberspace via the payment method.

– There is an extraction process for each bitcoin.

– The total number of bitcoins that can be mined is 21 million.

– As cryptocurrencies cannot be regulated by centralized authorities, such as governments or central banks, they are “decentralized”.

Investing in Ethereum for the long term

Investors wishing to gain exposure to Ethereum can purchase the native Ethereum currency, Ethereum, to increase their portfolio exposure.

Ethereum operates as a global computing platform that supports many other cryptocurrencies and a massive ecosystem of decentralized applications (dapps). Bitcoin can be considered a form of digital gold.

As Ethereum is the platform for many crypto-currencies, and dapps are open source, this gives it the opportunity to leverage the network effect and create long-term sustainable value.

Cryptocurrencies: are they worth investing in?

Investing in bitcoin can increase the diversification of your portfolio, as the price of cryptocurrencies has rarely correlated with the value of US equities.

As the use of crypto-currencies is likely to become even more widespread in the future, you may want to consider adding some crypto-currencies to your portfolio as part of a diversified investment strategy.

When investing in cryptocurrencies, present an investment hypothesis that explains why the currency will endure.

Cryptocurrencies are increasingly popular today, but buying them can be risky. If buying them seems too risky, consider other ways to profit from the cryptocurrency boom.

CME Group (NASDAQ: CME), a company that facilitates cryptocurrency futures exchanges, lets you invest in shares of Coinbase, Square and PayPal, or you can invest in an exchange like CME Group.

The upside potential of an investment in these companies can be very small compared with a direct investment in cryptocurrencies.

Conclusions

In conclusion, learning and investing in crypto-currencies has been very profitable over the years and the market is growing by the day, and is said to be the currency of the future.

Visit AskCrypto, a cryptocurrency forum that focuses on cryptocurrency enthusiasts and helps promote networking and communication in a better way for everyone’s benefit.

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