Why Would You Invest In Cryptocurrencies?
While you probably have heard of cryptocurrencies, such as Bitcoin and Ethereum, the idea of investing in it might still seem foreign. People who invest in it are often seen as “tech-savvy” nerds who only have a life online. Well, that is not the case at all.
Cryptocurrency has increased in popularity and acceptance over the years, and it is becoming even clearer that it is the currency of the future. Investing in it now will be one of the best things you could ever do for yourself. If you are still not sure if investing in cryptocurrency is something to consider, here are seven reasons you should invest in cryptocurrency.
7 Reasons You Should Consider Investing In Cryptocurrency
#1: Cryptocurrency gives you total control over your investment
Perhaps one of the most important benefits of cryptocurrency is the fact that it’s a decentralized, peer-to-peer system. This means that no third party can control your funds, and you’re fully responsible for managing your accounts and transactions.
In other words, you always know how much you have in your account and where it’s going – and banks and other institutions don’t. With cryptocurrency, your funds are truly yours; you’re not forced to give them up to any financial institution or government entity when transacting with someone else.
#2: Cryptocurrency is a lot more stable than most currencies
Imagine that you live in Venezuela. In 2018, the country experienced hyperinflation – the currency rapidly lost value. The government had to take over factories in an effort to control prices and give people jobs, but even so, food shortages were rampant, and violence became a daily occurrence.
Inflation means that your money is worthless every day, so when you buy groceries today, they may cost ten times as much next week—or tomorrow! It’s not unusual for Venezuelans to have to carry huge wads of cash around with them just to pay for their daily needs.
That’s why cryptocurrency can be such a valuable investment in unstable countries: it doesn’t lose its value due to inflation or any other external factors. While the price of bitcoin does fluctuate dramatically every single day, it hasn’t experienced the kind of devaluation that makes currency effectively worthless in places like Venezuela.
Plus, it’s decentralized: no one person or organization controls it (like a central bank). That means there’s no one who can arbitrarily change how much your money is worth – it’s all determined by the market through supply and demand (the same way stocks work).
#3: Buying and selling cryptocurrency is easy, even for the tech-challenged
Once you understand the basics, buying and selling cryptocurrency is as easy as using a platform like Coinbase to trade stocks, especially if you stick to names like Bitcoin and Ethereum that are universally known. If you’re in it for the long haul, you can use a cryptocurrency exchange service like Anycoin Direct or Kraken. These websites allow users to buy and sell their digital currency in almost real-time but will usually charge fees for using their service.
You may also choose to store your currency in a cryptocurrency wallet like Trezor or Ledger Nano S. Crypto wallets take the form of USB drives that hold your digital currency, allowing you to take them anywhere with an internet connection when ready to buy or sell. Some wallets even come equipped with screens that show your current balance on them, so they’re extra convenient!
Either way, it’s important not to get intimidated by all of the information out there – if you stay informed about the basics and only dabble in what seems sensible, then there’s no reason why getting started should be hard at all!
#4: It’s transparent and secure. There’s virtually no fraud with cryptocurrency
Your cryptocurrency is safe. There’s virtually no fraud with cryptocurrency because it uses cryptography to secure its exchanges. This means each transaction is protected by a private key and digital signature that corroborates each party involved in the exchange.
Plus, there’s no centralized bank controlling the currency, so it’s nearly impossible for hackers to steal your money or corrupt the system – it works through a distributed ledger known as blockchain.
#5: Cryptocurrency allows you to add diversification to your portfolio
Investing is about diversifying your portfolio. Diversification helps to improve the overall risk/return profile of a portfolio. So, it’s especially important for investors with narrow investment horizons and investors who are approaching retirement.
For example, if all of your investments are in stocks, then you’re overexposed to the stock market. In other words, you have too many “eggs” in one basket. If those specific stocks take a hit for whatever reason, or if the stock market crashes in general, then the value of your entire portfolio could drop significantly.
Diversifying across different asset classes can help to mitigate this risk since some asset classes may go up while others go down at any given time (e.g., when stocks are down, bonds might be up).
So how does cryptocurrency fit into this strategy? Cryptocurrency is often considered an alternative investment because it behaves differently from traditional assets like stocks and bonds, giving it the potential to add diversity to a portfolio that includes these more traditional assets.
#6: Investing in cryptocurrency enables you to benefit from innovation
Cryptocurrency is a new and developing technology. If you want to remain on the cutting edge, it’s important to give it serious consideration.
Cryptocurrency will continue to grow and develop as long as there are people working to make it better, which means an investment in cryptocurrency is an investment in making your financial future more secure. Don’t be left out; start preparing for the future by investing in the currency of the future now. You will one day be glad that you did so.
#7: More places are accepting digital currency
Another reason to put your money in cryptocurrency is that more and more places are accepting digital currency every day. This isn’t limited to other crypto investors: major retailers like Overstock and Whole Foods now accept some varieties of digital currency for purchases.
You can even use cryptocurrency for online purchases with a credit card number using services like Coinbase, which allow you to spend your crypto savings as cash.
Tips for Investing In Cryptocurrency
Do your research
When investing in any kind of financial instrument, it’s important to take some time and do your research. The best way to get started is by getting a basic understanding of what cryptocurrency is and how it works (i.e., read our article on the subject).
Research the management team behind the project
Once you are fully informed about a project’s goals, research its management team. Are there people with industry experience? Is there an active community that uses the coin? If so, talk to them and ask why they like using this particular coin.
Don’t invest more than you can afford to lose
No matter how exciting the project sounds or how convincing its promotional materials may be, never be tempted to invest more than you can lose. Cryptocurrency is volatile and can go down as well as up. You could lose your entire investment.
Buy low, sell high
This is a good rule of thumb for any kind of investment. But in this case, it’s especially important because the price of cryptocurrencies tends to fluctuate widely over short periods of time — sometimes even within one day or one hour! The only way to make money from them is by buying when prices are low and selling when they’re high.
Cryptocurrency exchanges can be hacked
When investing in cryptocurrencies, it’s important to consider the security of the exchange that handles your coins. Some exchanges have been hacked and lost customer data or money. In most cases, the cryptocurrency was stolen by hackers who broke into the exchange’s computer system.
Diversify your portfolio
You should never put all your eggs in one basket, so don’t invest all your money in one type of asset. If you’re considering buying some bitcoin or another cryptocurrency, think about how much risk you want to take on with your investments, and then spread out your money so that you’re not putting all your eggs in one basket.
Consider the security of your crypto wallet and exchange account information
There have been many reports of cybercrime-related to cryptocurrency exchanges and wallets being hacked or otherwise compromised, resulting in significant losses for investors and their companies.