For some investors, cryptocurrency investments have yielded breath-taking profits, but there are still hazards involved.
This guide will tell you whether cryptocurrency is a good long-term investment.
Is investing in crypto a wise long-term move?
Many cryptocurrencies, like Bitcoin and Ethereum, are introduced with high goals that may be accomplished over very lengthy time horizons. Even while the success of any cryptocurrency project cannot be guaranteed, early investors in a project that achieves its objectives might reap significant long-term rewards.
However, for any cryptocurrency initiative to be deemed a long-term success, it must achieve broad acceptance.
Bitcoin as a Long-term Investment
Because it is the most well-known cryptocurrency, Bitcoin benefits from the network effect, which makes more people desire to hold it. Bitcoin might be used as a digital form of money, but many investors now see it as “digital gold.”
Due to the fact that the quantity of bitcoin is set, as opposed to the supply of fiat currencies like the US dollar or Japanese yen, investors think that the cryptocurrency will increase in value over time. While other currencies may be minted at the whim of central bankers, the quantity of Bitcoin is restricted to less than 21 million coins. Many investors anticipate that when fiat currencies decline, Bitcoin will increase in value.
Those who are optimistic about the widespread adoption of Bitcoin as digital money think it has the potential to become the first genuinely international currency.
Ethereum as a long-term investment
Investors who want to increase their portfolio exposure to Ethereum may buy ether, the native token of the Ethereum network. While Ethereum is developing a worldwide computing platform that supports several other cryptocurrencies and a vast ecosystem of decentralized apps, 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 take advantage of the network effect and generate long-term, sustainable value. Smart contracts, which execute automatically depending on conditions entered directly into the contract code, are made possible by the Ethereum platform.
In return for executing smart contracts, the Ethereum network receives payment from users in the form of Ether. Smart contract technology has a great deal of potential to upend large businesses like banking and real estate as well as to open up brand-new markets.
The value and usefulness of the Ether token rise together with the adoption of the Ethereum platform on a global scale. Owning Ether enables investors who are optimistic about the long-term prospects of the Ethereum network to make money.
That is not to argue that Ethereum is uncontested. Solana (CRYPTO:SOL), Polygon (CRYPTO:MATIC), and Avalanche (CRYPTO:AVAX) are a few “Ethereum Killers” that are all designed to support smart contracts and employ a blockchain infrastructure that can process more transactions per second. Additionally, the speed has the benefit of being more affordable for consumers. The most widely used smart contract platform, however, is Ethereum.
Should you invest in cryptocurrency?
Due to the low price correlations that cryptocurrencies like Bitcoin have traditionally had with the American stock market, owning some may help you diversify your portfolio. If you think that people will use cryptocurrencies more often in the future, it makes sense for you to directly purchase some as part of a diversified investment portfolio. Be careful to have an investing thesis outlining why each cryptocurrency you buy in will endure the test of time. You ought to be able to manage the investment risk as part of your total portfolio if you do enough research and learn as much as you can about how to invest in cryptocurrencies.
You might think about other strategies to perhaps benefit from the increase of cryptocurrencies if purchasing bitcoin seems too risky. You may invest in a cryptocurrency exchange like CME Group (NASDAQ:CME), which enables trading in cryptocurrency futures, or you can purchase the shares of businesses like Coinbase, Block, and PayPal. Even if investing in these businesses might be rewarding, the upside potential is not as great as investing directly in cryptocurrencies.