Many people who have not yet invested in digital assets wonder why invest in cryptocurrencies?
The main reasons to invest in cryptocurrencies are to have the possibility of obtaining high returns on investment and to diversify your investment portfolio with a censorship-resistant asset that can serve as a store of value. Other factors to consider are the possibility of being able to invest with very little capital and being able to benefit from new investment opportunities that constantly arise..
5 reasons to invest in cryptocurrencies
Cryptocurrencies have experienced tremendous growth in recent years. The rise in value and adoption of Bitcoin was followed by Ethereum and a slew of new cryptocurrencies and tokens.
Additionally, there are currently many new ways to invest in blockchain technology, such as through decentralized finance (DeFi) or buying/selling non-fungible tokens (NFT).
We’ll take a closer look at some of these ideas below so you can decide for yourself whether investing in cryptocurrencies might be of interest to you.
1. High potential gains (but high risk).
While many cryptocurrency advocates believe that digital currencies will be used daily in the future, the cryptocurrency market today is highly speculative, with huge price spikes accompanied by violent crashes.
For this reason, we are faced with the possibility of obtaining incredible returns on our investment, but always exposing ourselves to much higher risks than if we invested in financial assets.
As a new technology, speculative behavior should occur and become less pronounced as the market matures. Until then, in the pursuit of extraordinary annual returns, it is necessary to take perfectly controlled risks.
2. Diversify your investments
Although investing in crypto is only a small part of your investment portfolio, digital assets are a good opportunity to diversify your investments.
Investing in cryptocurrencies and digital assets such as NFTs allows you to own assets that exist in separate areas from traditional investment products.
However, and beyond diversification for diversification, it should be kept in mind that the correlation, especially with the stock market, is very high, especially in times of uncertainty and fear.
But we must also take into account that at many other times the behavior of cryptocurrencies is better than that of the stock market, in addition to having exposure to a financial asset with unique characteristics, as we will see below. -below.
3. Unique and valuable characteristics of cryptocurrencies.
Another reason to invest in cryptocurrency is its own intrinsic characteristics.
If we compare cryptocurrencies to fiat currency, most cryptocurrencies have a limited supply that cannot be traded. Added to its decentralization, this means that they cannot be manipulated by government authorities to dilute their value through inflation.
They also cannot be confiscated without the permission of their owner, which makes them attractive to people who want to protect themselves against hyperinflationary events, bank failures, corralitos and other extreme events of this nature.
4. Ongoing investment opportunities.
If we review the various trends in the crypto industry, we can see that it is constantly innovating, which constantly produces new opportunities to generate revenue.
First there was the simple purchase of Bitcoin and early cryptocurrencies like Litecoin and Ethereum. In 2017 and thanks to smart contracts, there was the boom of ICOs.
Since then, we have had to learn what the stakes of cryptocurrencies are and what decentralized finance is all about. We have witnessed the birth of ecosystems on various smart contract platforms (Avax, Solana, Tezos…) and there have been many other advances such as NFTs, the Metaverse or games to win for nothing cite just a few.
All of these trends require effort to adapt quickly and expose yourself to new risks, but in exchange for significant potential gains.
5. You can start investing with little money
The possibility of starting to invest with a few euros or a few dollars is another reason to invest in cryptocurrencies.
Exchanges like Binance or Coinbase allow you to open accounts with very small amounts, and if we use decentralized exchanges we can transact with any amount and only pay pennies in most networks like Binance SmartChain.
Conclusion: Weigh the pros and cons
While there are a few reasons to be skeptical about cryptocurrencies, many traditional investors have shifted their (initially very negative) view to positions closer to exposure to these digital assets.
Blockchain technology has all the ingredients of a transformative industry with the potential to bring about change and improvement in many aspects of our lives.
However, it is important to be careful and understand the risks before you start investing. In addition, it should be added that it is necessary to take the time to understand the new trends that are taking place and to analyze the different investment ideas that appear.