Scroll Top
Cryptocurrencies as an investment in 2021

Cryptocurrencies are digital assets people use as investments and for purchases online. You exchange real currency, like dollars, to purchase “coins” or “tokens” of a given cryptocurrency. There are many kinds of cryptocurrencies. Bitcoin is the most famous, but Ether, Bitcoin Cash, Litecoin, and Ripple are a few others. All sorts of big tech and finance companies want a slice of crypto pie. Even Facebook has created a cryptocurrency called Libra.
The word cryptography means the art of writing or solving codes. Each “coin” is a unique line of code. Cryptocurrencies cannot be duplicated, which makes them easy to track and identify as they are traded.
You have probably heard of people making (or losing!) hundreds of thousands of dollars by investing in cryptocurrencies. It feels like a modern-day gold rush. But cryptocurrencies have actually been around for about 10 years. The earliest cryptocurrency was Bitcoin, created in 2009 by an unknown person who goes by the name Satoshi Nakamoto.

Are cryptocurrencies a good investment?

A lot of people think that cryptocurrencies and the technology behind them are the way forward for the world of finance and it is not too far-fetched to have that belief as there are innumerable examples of big banks teaming up with blockchain startups to improve or expand on their products. Digital currencies are superior to traditional fiat currencies in many ways such as quick transaction speeds, transparency and much lower fees.
As an investor, there are a few main reasons to keep in mind when wondering if you should invest in cryptocurrencies:

  • Low minimum investment barrier:

    Cryptocurrencies are very divisible, which means that you can buy smaller fractions. This allows for a very low investment barrier meaning anyone can get involved and you can have a very diverse portfolio.

  • High liquidity

    One of the primary characteristics of any asset is its liquidity – that is, how easy it is to purchase or sell it at a price close to the market rate. By their very nature, cryptocurrencies have high liquidity – you can quickly and easily buy and sell them, and the technological organization of trading platforms allows the use of a wide variety of tools and tactics, such as limit-orders (automated buying and selling at a specified price) and algorithm-based trading.

  • Transparency

    All blockchain transactions are available and visible to everyone on the planet. This allows an omniscient level of knowledge to everyone involved in that project.

  • Diversity of assets

    Investors can lower or mitigate risks by diversifying through the vast selection of different cryptocurrencies.

  • Fees

    Compared with stock trading or other legacy asset classes, cryptocurrencies offer significantly lower fees.

  • Fees

    Compared with stock trading or other legacy asset classes, cryptocurrencies offer significantly lower fees.

On the other hand cryptocurrencies, just like any other investment with the potential for high returns, is a risky venture. So, if you are new to the world of investing and you are considering investing in the virtual currency, it is important to evaluate the costs and benefits of doing so before adding cryptocurrencies to your investment portfolio. 

  • Cryptocurrencies are volatile

    The value of cryptocurrencies goes through extreme ups and downs. One of the reasons is the lack of regulation and institutional capital. Also, since the market is a small with a lot of speculation associated with it, the media has a great role to play in affecting prices. Investors are constantly on the lookout for any headlines or news stories that can have a potential impact on the market. In 2017, the value of Bitcoin swung between $900 and $20,000! Investing in cryptocurrency is risky, but all investing carries a degree of risk.

  • There are lots of unknowns

    There is still a lot that needs to be ironed out with how cryptocurrencies work. Relatively speaking, only a small percentage of people in the world understand the system and know how to operate it. Ignorance makes you vulnerable. As for any market, the future of cryptocurrency is not guaranteed. With thousands of entrants in the market, and new offerings emerging, not all will last. Investors who want to speculate in this market should probably stick with the most well-known names, such as bitcoin and ethereum. It is also wise to learn a bit about the market for each before investing.

  • Cybertheft

    Cryptocurrency operates online, and as you may be aware, hackers are always devising advanced techniques to steal confidential data and money. Cyberattacks are real and even more dangerous in the cryptocurrency world. Most of the losses happen during exchanges. That’s why you need a reliable and robust cryptocurrency wallet that will keep your transactions safe. Luckily, we are already seeing stringent measures being taken to enhance the security of the cryptocurrency infrastructure.

  • Cryptocurrencies have an unproven rate of return

    Trading in cryptocurrency is like gambling. Because it is exchanged peer to peer without any tie to regulatory standards, there is no pattern to the rise and fall of its value. You can’t predict changes or calculate returns like you can with growth stock mutual funds. There just isn’t enough data, or enough credibility, to create a long-term investing plan based in cryptocurrency.

In recent years, digital currencies have been gaining traction, and despite the fluctuations in the value of bitcoin and other cryptocurrencies, more and more people start seeing cryptocurrency as a viable investment option.
The most outstanding characteristic of cryptocurrency is that it is independent of any government or central bank.
The truth is that investment in cryptocurrencies is not for everyone. Some groups and individuals have been, and still are, skeptical about the whole idea to the extent of dubbing cryptocurrency a ‘bubble’ that will eventually burst. However, the crypto market proved to be more than just a passing fad, and the benefits of investing in cryptocurrency are known to be profound.

Related Posts