Cryptocurrencies have been rising for the past couple of years, and most investors mind this trend to keep up. These cryptos include Bitcoin, Ethereum, Litecoin, and other alternative coins or altcoins.
Many believe these digital currencies are becoming more popular because of their many uses. There are other reasons why many choose to include crypto in their investment portfolio, such as the following:
1. Ease Of Access
Nowadays, you can invest in any crypto because of technological advancement. You only need the internet and a device. Even a smartphone will do. You can also buy and sell cryptos anywhere because you only need to log into your crypto exchange account.
For instance, if you live in Australia and want to start trading cryptos in your fiat currency. You will just go here and create an account. Other similar trading platforms are catering to AUD (Australian dollar) as a fiat currency. The availability of mobile apps makes trading crypto even more accessible. So even if you are on the go, you can still place an order or position, that is, buy or sell cryptos.
2. Used As An Inflation Hedge
Many cryptos like Bitcoin are considered an inflation hedge, making them known as ‘digital gold.’ For instance, Bitcoin is known for its built-in scarcity, which means its hard cap of 21 million will make its minting stop once this number has been reached. However, its demand continues to grow, making its price increase each year.
However, not all cryptos are like this. Some have thousands of tokens enter circulation every minute, increasing the number of tokens. If developers don’t cap the supply, these tokens’ prices will inflate. With such, it is best to understand which cryptos to invest in if you want to gain profits over a long period.
3. To Diversify Your Portfolio
These days, investors consider crypto investment as a way to diversify their portfolios. Investment diversification is vital because it reduces the risk of bad events taking out your whole portfolio. If all you have is one type of investment, your chance of losing is higher.
For instance, what if you only invested in the real estate market? When such market dips, all of your assets are affected. But when you have diversified, such as investing in cryptocurrencies and real estate, you can minimize your losses. Diversifying your investment balances your portfolio.
Investing in crypto is known to be disconnected to bonds or stocks, making it a better investment diversification technique. This means when the stock market dips, it’s not likely that crypto prices will also go down.
4. Transparent Transactions
The technology behind crypto investment provides transparency in each transaction you and others make. This means that each trade is monitored and recorded in a public ledger. The advantage of this feature is that it’s unchangeable and hard to manipulate or track.
Unlike other investment transactions you can’t see, crypto investments make corruption almost impossible. Not even government or private entities can control the transactions being entered, making it decentralized for the public to see.
5. High Liquidity
Liquidity means the ability of cryptocurrencies to be bought and sold quickly. As mentioned, the advent of technology makes it easy for people to buy and sell cryptos. Thus, you can say that cryptos have high liquidity.
Especially for cryptos with high demand, many investors can easily buy or sell them to you and vice versa. Even some big businesses are trading cryptos, so you can likely find one who will sell or purchase cryptos from you.
6. May Lead To High Returns
All investments could lead to high returns, but cryptos have higher chances of doing it. That’s because the market is highly volatile, which means you can quickly gain profits as long as you have the right trading strategies.
For instance, the price could quickly go high in a minute. You can sell your cryptos higher than when you bought them during this event. You can even do this in a single trade, so imagine if you have several cryptos in your account. When their prices go up, your earnings could also go up.
However, this volatility could also mean losing all of your crypto investment in a second. That’s why you should know when to use the stop-limit or stop-loss features of the crypto trading platforms. You can limit your losses, especially since you can’t watch the market 24/7.
Investing in cryptocurrencies is subjective. Many people may have gained from such, but it may not be for some. Understanding the benefits mentioned above is vital before deciding if the crypto investment is for you.
If you see that the pros outweigh the cons, crypto may be an excellent addition to your investment portfolio. Remember, always check if such investment is suitable for the risk you can take.