Is Cryptocurrency a Good Investment?
With trillions of dollars invested as well as the hype in cryptocurrencies and new crypto projects being presented daily, the issue that many investors are wondering is whether or not cryptocurrencies are a good investment.
Is Cryptocurrency a great investment for You?
Firstly, we need to make among investing and trading – the most important difference being the time horizon. With exchanging any asset, the time horizon is commonly short-term and often more speculative anyway. It’s not rare for traders to execute dozens of trades a day to take advantage of intra-day price fluctuations.
Trading vs Investing
Trading is approached with discipline as those people who are most successful carefully manage their exposures. However, investing is also a disciplined plan but meets specific financial goals over a longer period, usually five-years or higher. Investors may create a strategy in order to save for faculty, get a house, or plan for retirement.
Next, you should examine your risk tolerance. As cryptocurrencies experience volatility, whether cryptos is a superb investment is dependent upon just how much risk you are able to bear. If even small swings in prices help keep you up in the evening, higher volatility investments may not be the proper investment for you personally.
With crypto assets experiencing levels of price volatility that aren’t too different from those gone through by other asset classes, such as growth stocks or high-yield bonds, they may be risky assets. You should be ready to face fairly significant price swings or potential loss.
Advantages of Committing to Cryptocurrency
To date, we’ve discussed some of the main considerations that investors must be cautious about but there are certainly positive arguments about whether cryptocurrencies make the perfect investment too.
1. New asset class
As cryptocurrencies mature and develop, such as we’ve seen with Bitcoin and Ethereum, we also begin to see the emergence of such assets like a new asset class. To be sure, we’ve seen large professional fund managers, creating dedicated investment funds solely committing to Bitcoin and other cryptos.
The said institutional investors also look for diversify their risks by continuing to keep different investments that behave differently underneath the same economic conditions. Some debate that cryptocurrencies provide positive diversification effects, specifically against rising inflation.
Moreover, we’ve seen the introduction of more investment instruments that capture the upside of not just specific cryptocurrencies, for example options and futures on Bitcoin and Ethereum, and also specific investment funds that professionally manage cryptocurrencies on the part of investors.
3. Upside potential
Lastly, one more positive would be the fact the sphere is quite new, and thus you will find potentially considerably more changes that could come down the fishing line to produce investing in cryptocurrencies a lot more attractive. Examples are stablecoins, which are cryptocurrencies which can be from the valuation on a fiat currency and assets to back the digital currency.
In case you concern yourself with fraud, there might be more stringent regulations, notify cope with the first Coin Offerings, to assist protect investors. We mentioned futures on cryptocurrencies and as the market develops, there may be futures on other cryptocurrencies which are traded with a reputable exchange. Futures also accommodate cryptocurrency bears to trade the asset short, thereby helping the liquidity overall.
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