Are you thinking of getting into cryptocurrency? We cut through a lot of the hype and complexity surrounding cryptocurrency so that you can understand the risks, the benefits, and the opportunities in this emergent system of alternative currency and exchange.
Why invest in cryptocurrency? In simple terms, cryptocurrency is a type of digital money that operates independently of traditional financial systems and allows for secure and anonymous transactions. The idea behind this decentralized financial (DeFi) system is to create a form of financial transaction that is at once more secure and transparent than traditional finance. It is more private, more accessible, and less beholden to fees or regulations than traditional finance.
Why buy cryptocurrency? Cryptocurrency absolutely carries higher risk and is a great deal more volatile than investment in traditional currencies or stocks. This means that while the potential is there for an extremely fast profit and an enormous return on your investment, the very same rule applies to the speed with which you could lose it all. Individual tokens, and indeed the entirety of the crypto landscape, can go through rapid rises in price followed immediately by sharp plummeting in value, all in a matter of minutes or hours.
This may not differ dramatically from catalyzing events in the traditional stock market which may result in rapid gains or losses. Fluctuations in cryptocurrency are often more sudden, less predictable, and in some cases, less readily explainable than movements in the traditional market. A major reason for this is that cryptocurrency is still very much in an adoption phase today. As companies, industries and whole nations make decisions to adopt or eschew certain cryptocurrencies, the impact on token value in the marketplace can be abrupt and dramatic.
But these warnings are merely cautionary notes as you explore cryptocurrency. Because in reality, decentralized finance has gained rapidly in relevance over the last several years, and evidence suggests this mode of financial interaction is here to stay. The time is now to get on board or risk missing out on the opportunities inherent to cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a form of virtual currency rooted in “blockchain” technology. A blockchain is a digital public ledger of transactions that is decentralized. It doesn’t rely on the oversight or management of a third party (such as a bank or exchange) in order to facilitate secure transactions. Information regarding transactions is digitally stored on the blockchain in a way that can’t be manipulated or falsified.
Crypto assets, also known as digital assets, are a type of financial asset that exist purely in the digital world and are typically based on blockchain technology. A Crypto asset can take various forms, including:
- security tokens
- utility tokens
- non-fungible tokens (NFTs)
This digital public ledger is distributed across a network, is fully transparent, and is invulnerable to decryption, fraud, or human error. As a result, blockchain allows for the virtual exchange of tokens (cryptocurrencies) for goods and services between two verifiable parties without the need for a trusted third party. This is why such exchanges are often referred to as “trustless.”
Is it Good to Invest in Cryptocurrency?
Cryptocurrency represents a new mode of doing business that removes certain fees, regulations, and risks from the global e-commerce sphere. In doing so, the numerous different digital currencies that have emerged (many promoting their own innovations around the use of DeFi) have invited massive speculation and investment. In addition to the massive growth in value of the original cryptocurrency token—Bitcoin—countless other currencies have emerged and generated their own value.
Exchange-traded funds (ETFs) are investment funds that are traded on stock exchanges, just like individual stocks. They are designed to track the performance of a particular market index, commodity, or asset class, and provide investors with exposure to a broad range of investments through a single purchase.
Crypto exchanges are platforms where individuals can buy, sell, and trade cryptocurrencies. Some popular cryptocurrency exchanges include:
- Binance: A Malta-based exchange that supports over 100 cryptocurrencies and has a strong focus on security.
- Coinbase: One of the largest and most well-known exchanges, based in San Francisco. It supports several popular cryptocurrencies and has a user-friendly interface.
- Kraken: A US-based exchange that has been around since 2011. It offers a wide range of trading options and supports several fiat currencies.
- Bitfinex: A Hong Kong-based exchange that offers margin trading and has a strong reputation for security.
- Huobi: A Singapore-based exchange that has a large selection of cryptocurrencies and supports several languages.
It’s important to note that cryptocurrency exchanges are not regulated and are susceptible to hacks, so it’s important to choose a reputable exchange and to securely store your assets.
Should I Invest in Cryptocurrency?
1. It’s Easy to Get Started
The technology and concept behind cryptocurrency might seem complex. The truth is that it’s actually very easy to explore this mode of investment. Before you do, you should take a few basic rules into consideration.
First, crypto investment should only represent a small fraction of your investment portfolio, especially for beginners.
Second, there are many tokens to choose from. Do your research and learn about those that interest you, but bear in mind there are many which have historically invited speculation and spiked in price before flatlining and disappearing altogether. This is a good reason to focus on Bitcoin first—even if you’re only starting with a tiny fraction of a single Bitcoin.
With these considerations in mind, sign up for an account with a trusted exchange forum like Coinbase, Gemini or Binance, deposit a few dollars, and start to familiarize yourself with the basic crypto landscape. You will also need to create a crypto wallet, which will either be stored on your desktop, mobile device or a storage hardware device like a USB card. Alternatively, you may be able to create a wallet this is stored on the cloud.
A private key in cryptocurrency is a secret code that allows you to access and control your cryptocurrency holdings. It is an essential component of cryptocurrency wallets, as it is used to sign transactions and prove ownership of the funds stored in the wallet.
2. Diversify Your Portfolio
If you have long-term investment already in place you may be looking for diversification. While it’s true that crypto should only be a very small part of your investment strategy, it does represent a unique opportunity to diversify your investments. Investing in crypto provides you with an asset that exists in a separate sphere from the behavior of the traditional financial marketplace.
Crypto assets, because of its global interchange and the decentralized nature of its transactions, are frequently insulated from the types of sweeping events that permeate every other part of the centralized financial market. Asset allocation is the process of dividing an investment portfolio among different asset categories, such as stocks, bonds, real estate, and commodities, in an effort to balance risk and reward. The idea behind asset allocation is that by spreading investments across different asset classes, an investor can reduce the impact of market volatility on their portfolio.
Crypto markets are open 24/7 and operates independently of traditional stock exchanges, allowing for near-instant trading of digital assets.
In spite of its characteristic volatility, crypto can be a great way to balance against events with an otherwise universal impact on financial systems. Diversifying investments across different asset classes can help to reduce overall portfolio risk and provide a more stable investment return over time.
3. Enjoy Dramatic Return On Your Investment:
Take a quick look at Bitcoin for an understanding of just how dramatic a return one could make in the crypto sphere. According to Coinbase, in August of 2012, a single Bitcoin was valued at $112+. In February 2023 it is work $21,600. Naturally, as the first entrant into an area of tremendous and rapid innovation, Bitcoin is unparalleled in the marketplace both in terms of its value and its long-term viability. Some crypto investors have seen a rapid and dramatic rise from fractions of a penny per token to hundreds and even thousands of dollars per token in a matter of months or years. This means that you have the opportunity today to prospect any number of tokens at an extremely modest cost with the potential for rapid and robust growth.
4. More Transparency in Transactions
One of the best arguments in favor of investing in cryptocurrency is that it allows for a type of transparency that protects all parties in a transaction. Because all cryptocurrency transactions are encrypted on a publicly distributed ledger that cannot be altered or manipulated, there are fewer likely investment risks as a result of regulatory obfuscation, internal falsification of financial data, incorrect valuations and the countless other discrepancies that cost investors billions on traditional exchanges. As Forbes explains to the novice crypto investor, “Imagine perfect transparency for the unicorns: a dramatic reset in valuation would be unlikely if all of the company’s finances were transparent from the outset and potential investors scrutinized their viability. Balloon spikes would happen much less frequently, and all constituents would be better served.”
In this way, cryptocurrency has emerged as a solution for many of the problems plaguing a deeply flawed traditional finance system. And in doing so, it has created a new layer of protection for the everyday investor. This type of peer-to-peer transaction
5. More Places Are Accepting Digital Currency
Just a few short years ago, cryptocurrency seemed to the outside observer an incomprehensible idea. How could this invisible, virtual form of currency carry any value in the real world? Even today, there are those with a controlling interest in the centralized financial markets who doubt the legitimacy of cryptocurrency. However, perhaps the reality which most drives home the actual value of cryptocurrency is the fact that a growing number of merchants—both online and in brick-and-mortar establishments—now accept Bitcoin and several other prominent tokens. In other words, it is now possible to walk into a store—look for the Bitcoin sticker on the front window or door—and purchase actual goods simply by transferring the requested sum to a merchant. You can do the same at a growing number of e-commerce websites as well. There are more businesses and establishments who accept cryptocurrency all the time, a fact which has attached actual, meaningful, real-world value to digital tokens.
6. Future Monetary Systems Are Being Built On Cryptocurrencies
The real-world value of cryptocurrency is finding reinforcement in more than just the retail and service establishments that now accept Bitcoin. Adoption is also occurring in far-reaching and institutional ways that promise to incorporate blockchain technology into fundamental infrastructural aspects of our financial markets. For instance, in the fall of 2021, leading accounting firm Deloitte announced a new partnership with an up-and-coming cryptocurrency token called Avalanche (AVAX). According to pymnts.com, “The Deloitte partnership will leverage the Avalanche blockchain for better security, accuracy and speed for Federal Emergency Management Agency funding, while also assisting state and local governments who want to streamline disaster reimbursement applications.” Partnerships like this highlight the faith that a growing number of large, traditional financial entities are vesting into the concept of cryptocurrency. And as a bonus, for those invested in tokens that join such partnerships, spikes in value tend to follow such announcements. For instance, Avalanche tokens surged to double their value in the days after this deal was forged.
7. The Full Potential of Blockchain Is Unrealized
Such partnerships as the one noted above demonstrate that new entrants into the field of cryptocurrency such as Avalanche are continuing to deliver new innovations to the sector. One reason that so many tokens crowd out this area of finance is that many offer their own value propositions. These propositions are couched in an array of groundbreaking developments from unique e-commerce infrastructures and advanced security measures to industry-specific rewards and even sheer novelty. Moreover, as other forms of virtual monetization come to fruition—such as the digitalization of collectibles like art and baseball cards as Non-Fungible Tokens (NFT)—the potential value and applications of blockchain will continue to reveal new opportunities for early investors.
8. It’s More Possible to Make Informed Decisions Than it Used To Be
As adoption of cryptocurrency becomes more widespread, so too does information about how it works, why it works, and the types of factors that can predict long-term stability and value. Bear in mind that stability is a relative term here and that even the bellwether token—Bitcoin—remains itself subject to wild fluctuations in value. However, as in the Deloitte and Avalanche partnership highlighted above, there are clear and readily explained reasons why the token’s value spiked so dramatically. As with traditional stocks, your research and understanding of emergent currencies, their respective value propositions, and their likelihood of achieving widespread adoption in the traditional financial sphere can all help you make smarter decisions. You can’t predict the future, but you can conduct enough research to make a few savvy moves.
9. It’s Not Too Late to Get Onboard
Speaking of making a few savvy moves, if your biggest concern is that you simply missed the blockchain boat, rest assured that opportunities still abound to make smart investments. True—if you didn’t invest in Bitcoin more than five years ago, it’s probably too late to make a fortune on this investment. The cost of tokens is already prohibitive. But there are numerous other tokens on exchanges, with countless new entrants joining the fray every day. While you may want to anchor your position with Bitcoin, you can make some low-cost speculative moves into some cheaper currencies. The fact is that we can’t anticipate exactly where the whole of the crypto market is headed, but there are tokens that are affordable enough today that the risk of speculating can be pretty low.
10. Blockchain Isn’t Going Anywhere
In fact, there may be more risk in failing to seize this opportunity today. That’s because all evidence suggests blockchain technology and cryptocurrency are becoming increasingly intertwined with traditional finance. As more businesses large and small adopt cryptocurrency, more e-commerce operations build their entire infrastructure on certain tokens, and more everyday investors add virtual tokens to their portfolios, cryptocurrency only solidifies its position in the marketplace. While the value of individual tokens can be highly volatile, there is reason to believe that the broader cryptocurrency market will become an increasingly stable and accepted part of the mainstream economy.
Should I Buy Bitcoin Now?
Here are a few sources where you can get advice on investing in cryptocurrency:
- Cryptocurrency forums and online communities: Online forums like Reddit and Bitcointalk are a good place to learn about cryptocurrencies and to get advice from other investors.
- Cryptocurrency experts and influencers: There are many individuals who are considered experts in the field of cryptocurrency, and following their analysis and insights can be helpful. However, it’s important to be cautious as some influencers may have conflicts of interest.
- Financial advisors: If you use financial services, you can speak with them about investing in cryptocurrency and seek their advice. A brokerage or banking service may help.
- Research and analysis: There is a wealth of information available on cryptocurrency, including market analysis, technical analysis, and other research reports. You can use this information to inform your investment decisions.
- Cryptocurrency exchanges: Some exchanges provide investment advice and research to their users, which can be useful for new investors.
Which Cryptocurrency Should I Buy?
Investing in cryptocurrencies involves a high degree of risk, as the prices of cryptocurrencies can be extremely volatile and can fluctuate widely in short periods of time. Before making any investment decisions, it’s important to conduct thorough research and seek advice from a financial advisor to understand the risks and potential rewards involved.
It’s also important to remember that no cryptocurrency is a sure thing, and even the most promising projects can face challenges or fail to live up to their potential. Some popular cryptocurrencies that you might consider researching as a good investment include:
- Bitcoin (BTC)
- Ethereum/ Ether (ETH)
You might also check out Litecoin, Solana, Cardano, or Dogecoin for you digital wallet.
Ultimately, the best cryptocurrency to invest in will depend on your individual financial situation, investment goals, and risk tolerance, among other factors.
Conclusion: Should I Invest in Cryptocurrency?
We have done our due diligence to answer this question. Fiat currencies have been the dominant form of currency for many decades, but the rise of cryptocurrencies has raised questions about the future of money and the role of traditional fiat currencies in the digital age. Fiat currency, such as the U.S. dollar, remains widely used and accepted. However, the use of cryptocurrencies and other digital assets is growing, and it remains to be seen how they will impact the financial world in the future. Consider your risk tolerance and financial goals when deciding, how much should I invest in crypto currency?