It’s been almost a decade now since the financial crisis of 2008. However, it still continues to impact the world of finance and has forced people to rethink their strategies when it comes to investing their money. Among all other fields, the fintech sector has seen the most growth post-crisis and is now home to many exciting new ventures like cryptocurrencies. For those who aren’t aware, cryptocurrency is essentially digital money that can be used as an alternative medium of exchange. While it’s not widely accepted at stores or businesses just yet, its value has grown exponentially over the past year. This is why so many people have started reevaluating their investment strategies. One such strategy involves investing in cryptocurrencies directly.
Why Investing in Cryptocurrency is a Good Idea
Initially, cryptocurrencies were used exclusively as a method of payment between two parties without the need for a third-party banking intermediary. However, the exponential growth of their value even in the face of a bear market has led people to rethink the potential of cryptocurrency as an investment. If you’re wondering why you should invest in cryptocurrency, then here’s a quick list of reasons why you should consider it. – Increased Liquidity – Cryptocurrency investments are highly liquid in nature, allowing you to cash out at any time without having to wait for regulatory approval. – Low Barrier to Entry – Investing in crypto is far more accessible than other traditional asset classes like stocks. You don’t need to have millions to get started investing in cryptocurrencies. – Lower Risk – Cryptocurrencies are highly volatile, making them inherently riskier than other investments. However, the risk can be offset with proper diversification. – Tax Advantage – The IRS identifies cryptocurrencies as taxable assets, but there are certain strategies you can employ to minimize your tax burden. – Rising Popularity – All the above-mentioned advantages are leading to an increasing interest in investing in cryptocurrencies. – Technological Advancement – New innovations and technology are drastically changing the cryptocurrency ecosystem. – Regulations – Cryptocurrencies are being regulated as legitimate assets. This means that you have access to more investment opportunities. – Security – Cryptocurrencies are far more secure than other traditional assets.
How to Invest in Cryptocurrencies?
To invest in cryptocurrencies, you’ll first need to open a trading account with a cryptocurrency exchange. You can then buy cryptocurrencies directly from the exchange with USD or other cryptocurrencies. Depending on the exchange, you may have the option of selling cryptocurrencies directly back to the exchange. This can be a great way to take advantage of short-term price fluctuations. Depending on the exchange, you may also have the option of trading cryptocurrencies with other investors. This is called crypto trading and is more complicated than simply buying and selling. If you want to invest in cryptocurrency, then you’ll need to find an exchange that supports your desired trading pair.
Pros and Cons of Investing in Cryptocurrency
Investing in cryptocurrency is definitely a high-risk, high-reward strategy. If you choose to invest in cryptocurrency, then you need to be prepared for heavy price fluctuations. Cryptocurrencies are extremely volatile in nature. This means that their value can rise or fall dramatically in a short period of time. Depending on the crypto, this volatility can be as high as 10% per day. The high level of risk also means that you’ll need to have a high level of diversification to make sure that you don’t lose all your investment in a single drop. You should also be aware that the cryptocurrency market is completely unregulated. This means that you don’t have any government-backed investment protection. Finally, you should be prepared for heavy taxation since the IRS treats cryptocurrencies as taxable assets.
What’s Next for the Future of Finance?
When people think about investing, they usually think about stocks, bonds, and real estate. However, cryptocurrencies are quickly emerging as an exciting new alternative. And this isn’t surprising given the massive growth potential of this industry. The cryptocurrency market is expected to grow from $100 billion in 2018 to $1 trillion by the end of 2020. This represents a 10-fold increase in just two years! The reason for this sudden expansion is that new investors are entering the market via exchanges like Coinbase and Binance. They’re drawn in by the promise of high returns, but they’re also being introduced to the concept of blockchain, or distributed ledger technology, for the first time.
How to Choose the Right Platform?
When cryptocurrency was first introduced to the world, it was a new concept that didn’t enjoy a lot of popularity. However, since then, the industry has grown massively. This has led to an increase in the number of cryptocurrency trading platforms. However, not all of these are created equal. Some are better suited for beginners than others. So, how do you choose the right platform? Here are a few things you need to keep in mind while you’re making your decision. Fees – The first thing you should consider is the trading fees charged by different exchanges. These can often be quite high, but you can always find exchanges that offer lower rates. Liquidity – Liquidity refers to the ease with which you can buy or sell a certain asset. If you want to invest in a certain asset but no one is buying it, then it’s very difficult for you to cash out your investment. Fund Security – Cryptocurrency trading platforms are centralized by nature, which means that they can be hacked. You should always check to see how secure the platform is. Customer Support – Cryptocurrency trading is an exciting new industry, but it’s also one that’s often misunderstood by newcomers. You should look for an exchange with great customer support.
The financial crisis of 2008 forced people to rethink their strategies when it comes to investing their money. Among other fields, the fintech sector has seen the most growth post-crisis and is now home to many exciting new ventures like cryptocurrencies. For those who aren’t aware, cryptocurrency is essentially digital money that can be used as an alternative medium of exchange. While it’s not widely accepted at stores or businesses just yet, its value has grown exponentially over the past year. This is why so many people have started reevaluating their investment strategies. One such strategy involves investing in cryptocurrencies directly.