5 Reasons to Invest in Cryptocurrency Now
Byline: Hannah Parker
The first half of 2022 has created skepticism in the cryptocurrency market, with many cryptocurrencies dropping more than 50% from their all-time highs. Owing to the volatility of the market, cryptocurrency runs on speculative investments. While many experts contend that cryptocurrency prices can further fall before they can be fully sustained, many are entering the market anticipating a rise.
Dave Abner, head of the global development at Gemini, a popular cryptocurrency exchange, mentions that 2021 was a breakthrough in the cryptocurrency industry and that “There’s tremendous focus and attention being paid to [the crypto industry].” So, is cryptocurrency an investment worth the risk?
What are The Risks of Cryptocurrency Investments?
Cryptocurrency is a highly volatile investment wherein you might make high returns but risk losing everything. In addition to this, there is an increase in cryptocurrency scams and fraud, leading to an even more significant loss.
Many firms might promise investors a high return from investing in cryptocurrency while such risks are minimized. This is an exaggerated promise of high returns, which, most of the time, returns void.
Currently, there are little to no regulations in the cryptocurrency industry, which creates a domino effect of problems, including more competition, that is not regulated in blockchain projects. There is the potential that if regulated by government officials, that cryptocurrency might be seen as a threat and not innovative technology.
Lastly, the cutting-edge technology used in cryptocurrency development and sales can pose a risk for investors as much of the technology is still being developed and has not yet been extensively proven within real-world situations. The threat of regulation is the single largest risk facing many cryptocurrencies.
This is why the founders of the Bitcode Method suggest that many security protocols on different trading platforms should be analyzed and assessed before purchasing cryptocurrency.
Why Invest in Cryptocurrency?
Cryptocurrency is a good investment, especially if you want to gain exposure directly to a digital currency, which is becoming a demand. Any digital asset has an excellent equity potential as opposed to stocks, for example. Many investors are appealed to the fact that every product or token bought on the digital market would be owned by the user, away from unreliable third parties.
These are five reasons why you should invest in cryptocurrency:
An inflation hedge. Cryptocurrencies are known to be “digital gold” because of their inflation hedge. This inflation hedge came due to its built-in scarcity, where cryptocurrencies are limited to a certain amount minted, creating stability in value.
Store of value. While some cryptocurrencies come with high volatility, some stablecoins can push cryptocurrency rewards and digital DeFi wallets and bring forward a stable value, despite being crypto.
Decentralized banking. Structured on a decentralized ethos of peer-to-peer and permissionless banking, decentralized finance is a way to make a digital economy of algorithmic money, removing the need for fees and oversight from central banking institutions. With DeFi, the blockchain system has further security measures, requiring the verification of transactions and identities, which makes the entire process more secure than a centralized exchange.
Futuristic technology and infrastructure. Blockchain technology has the potential to assist corporations in maintaining more secure records while protecting customers’ sensitive data and verifying identity more seamlessly and efficiently. Despite being a new technology, cryptocurrency can potentially have real-world value like other assets.
A means of passive income. If you learn how to buy and hold cryptocurrency in what is known as DeFi positions, which can result in passive income yields. Passive income is generally built through the earned interest gained in lending, staking, pooling, and trading DeFi. Earnings differ between platforms, but users can anticipate earning anywhere from 3% to 14% APY by staking leading cryptocurrencies.
The advantages of incorporating cryptocurrency or cryptocurrency stocks into your portfolio start to mount when you consider the advantages of diversification and the possibility of protecting against inflation. Several users who desire quick and secure transactions find considerable value in many cryptocurrencies’ functionality. And as time goes on, it will become easier to use with fewer technological barriers.
Cryptocurrency, while volatile, has been discussed as a transformative technology that will revolutionize many industries. While cryptocurrency remains a digital asset, this provides additional safety as it can be seen as a safe store of value. Cryptocurrency remains a highly speculative investment with no guarantee that it will ever hit a largescale mainstream usage. But, we have seen that cryptocurrencies have been hailed as a game-changer, and it’s only a matter of time before we start facilitating economic activities that might not have been possible before using cryptocurrency.
This article has been published in accordance with Socialnomics’ disclosure policy.
