Bitcoin And Other Cryptocurrencies As Investment Objects
In the current economic instability, investing has become a basic human need and is practically equated with survival. We all remember well the spring quarantine in 2020, the “forced rest” and have already enjoyed the lockdowns. The consequences of such measures have been disastrous for some people and companies without a financial cushion.
At such moments, the value of investing is especially acutely realized and the question already arises not “yes or no”, but “how and in what”. In the article, we will consider traditional methods of investment, reveal the topic of crypto invest, its advantages, and disadvantages, and also share security rules in such a complex issue as investing in a cryptocurrency.
At first glance, there are a lot of options. You can buy gold, stocks in Apple, SpaceX, or other well-known tech companies, invest in real estate, or put on a bank deposit. However, if you look closely at each of them, a number of obstacles arise.
Real estate requires significant financial investments – you can’t buy a piece of the corridor for an annual bonus at work. To buy shares, you need to know the basic principles of the stock market and involve a broker, which requires a significant investment of time and effort. Gold is also not sold in small pieces in the underpass.
Difficulty in acquiring the aforementioned assets and the financial barrier is not the only drawbacks, liquidity is also an important issue. After all, if after a few months you urgently need cash, you will not be able to get it instantly for the above assets.
Bitcoin And Other Cryptocurrencies As Investment Objects
In November-December 2020, we saw another surge of interest in cryptocurrencies, which pushes their quotes up. The second week of December 2020 showed unprecedented growth in bitcoin, its rate reached $ 23,500, and the total capitalization exceeded $ 400 billion.
The statistics speak for themselves – over the past 2 years, the main cryptocurrency has risen in price by more than 600%, from $ 3,500 during the crypto winter in February 2019 and up to today – $ 23,000.
Experts predict the massive distribution of cryptocurrencies on a par with the Internet and assume that by 2024, 1 billion people will use cryptocurrencies. Naturally, this will entail an increase in investment interest, both among ordinary people and among companies.
In such rapidly developing trends, it is necessary to consider the advantages and disadvantages of investing in bitcoin and other virtual assets (altcoins), promising cryptocurrencies for investing in 2021, and the security rules when working with them.
Benefits of Investing in Crypto Assets
We highlight the following advantages of investing in cryptocurrencies:
- low entry threshold;
- high profitability;
- ease of entering the market;
- low costs.
Low entry threshold: Traditional investment options involve large financial investments (from several thousand dollars). In cryptocurrencies, you can take the very minimum amount of money (at least $ 5) and buy the relevant amount of cryptocurrency with it. This can be done either on a regular basis, by buying bitcoin upon receipt of a salary, or by purchasing cryptocurrency with the money saved or earned unscheduled. The best cryptocurrencies for investment can be selected on specialized resources, but in any case, in this matter, you need to carefully study the information.
By the way, the regularity of purchases leads to price averaging, that is, to an increase in profitability in the long term.
High profitability: Despite the volatility, fundamentally Bitcoin has only increased in value since its inception in 2009. If you draw a line on the graph of its price from $ 1 in 2011 to the price of $ 23,000 in December 2020, ignoring local peaks and troughs, you will see growth. By the way, this is 2,300,000% over 9 years, almost 200% per annum with compound interest.
Liquidity: The system works equally quickly in two directions; you can sell cryptocurrency as quickly as you buy it. Therefore, if an investor needs cash, he can get it back almost instantly, unlike selling gold or stocks. Crypto Investment is a dynamic thing.
Ease of market entry: As we have already mentioned, conservative investment methods require the involvement of intermediaries. Cryptocurrencies can be bought in a few clicks by simply downloading the application. Some of them are completely anonymous and do not even require verification.
Low costs: There is no cumbersome and costly intermediary infrastructure in the cryptocurrency market, as in the securities market. Application algorithms provide an optimal purchase rate and low commissions.
What To Look For When Investing In Crypto Assets?
Volatility: This is perhaps the most common argument for which cryptocurrencies are branded. Indeed, we can regularly observe large price fluctuations up and down. In such conditions, if you buy bitcoin at the peak of its value, then if the price falls, you can lose a significant amount of money.
In the short term, volatility is of tremendous importance, but if you look at the situation in retrospect, everything looks different. The story of how back in 2010 an American bought two pizzas for 10 thousand bitcoins is a fait accompli that illustrates the trend.
Therefore, it is necessary to closely monitor the market, trends and try to choose the right time. Investing in cryptocurrency in 2020 requires both studying the issue in retrospect and becoming familiar with the trends of the crypto industry.
Risks: There is no risk-free investment, but risky investments are usually the most profitable. In the case of bitcoin, there is a risk of falling prices in the short term. Also, special attention should be paid to the security rules when working with cryptocurrencies, which are described below.
Safety regulations: In order to avoid risks when investing in cryptocurrencies, you need to know the following basic things:
- Buy/sell cryptocurrencies only in time-tested services.
- Trust the storage of funds only to non-custodial * services.
- Safely and securely store private keys and seed-phrase from the wallet with assets.
Thus, we can summarize that the trend of investing in cryptocurrencies is only gaining momentum. It is very simple, accessible to everyone, and quite profitable. At the same time, you need to follow simple safety rules, choose reliable services and study promising cryptocurrencies for investing in 2021. We wish you only profitable investments!