Many cryptocurrencies, including Bitcoin and Ethereum, were introduced with aspirational objectives that may be fulfilled over a considerable amount of time. Even while the success of any cryptocurrency initiative cannot be certain, early investors in projects that succeed in their objectives may reap substantial rewards in the long term.
To be seen as a long-term success, like with every cryptocurrency initiative, mass acceptance is required.
Bitcoin as a long-term investment
Because Bitcoin is the most well-known cryptocurrency, it benefits from network effects, which make more people want to acquire it. Bitcoin may be used as a digital form of money, but many investors now refer to it as “digital gold.”
In contrast to the supply of fiat currencies like the U.S. dollar or Japanese yen, the supply of bitcoin is fixed, which leads some investors to assume that the cryptocurrency will increase in value over time. While other currencies may be issued at the central banker’s discretion, the quantity of Bitcoin is restricted to fewer than 21 million. Many investors anticipate that when fiat currencies decline, the value of Bitcoin will rise.
Those who are optimistic about Bitcoin’s broad adoption as digital money think it has the potential to be the first genuinely international currency.
Ethereum as a long-term investment
Investors who wish to diversify their Ethereum portfolio may buy Ethereum, the native coin of the Ethereum platform. Ethereum is creating a worldwide computing platform that supports several other cryptocurrencies and a sizable ecosystem of decentralized apps, whereas Bitcoin may be thought of as digital gold (“dApps”).
Because dApps are open source and there are so many cryptocurrencies built on the Ethereum platform, there are chances for Ethereum to experience network effects and produce long-term value. Smart contracts are those that run automatically in accordance with conditions that are explicitly stated in the contract code and are supported by the Ethereum platform.
By executing smart contracts, the Ethereum network is compensated with ether from users. The use of smart contracts has the ability to completely transform existing markets and upend established sectors like banking and real estate.
The usefulness and value of ether are growing together with the adoption of the Ethereum platform on a worldwide scale. Investors are upbeat about the Ethereum platform’s long-term prospects and stand to gain financially from holding ether.
This does not mean that Ethereum is unchallenged. Solana, Polygon, and Avalanche are just a few examples of “Ethereum killers” that are designed to handle smart contracts and use blockchain networks that can process more transactions per second. Speed has the additional advantage of being less expensive for consumers. The most popular smart contract platform, however, is Ethereum.
Should you invest in cryptocurrency?
Due to the low price connection that cryptocurrencies like Bitcoin have historically had with the American stock market, owning some cryptocurrencies may help you diversify your portfolio. It can make sense for you to acquire several cryptocurrencies outright as part of a diversified portfolio if you believe that their usage will increase over time. Be sure you have an investing thesis explaining why any cryptocurrency you buy in will endure over time. You ought to be able to manage investment risk as part of your whole portfolio if you perform your due diligence and study as much as you can about how to invest in cryptocurrency.
You might think about alternative methods to benefit from the development of cryptocurrencies if purchasing them seems too risky. You may invest in exchanges like CME Group that enable trading in cryptocurrency futures or purchase shares of businesses like Coinbase, Block, and PayPal. While investing in these businesses may be profitable, the upside potential is not as great as investing directly in cryptocurrencies.
