6 Reasons to Invest in Cryptocurrency
If you are in the world of investments, surely you have come across the term cryptocurrency. It’s a topic that has elicited a lot of reaction globally due to its high returns and risks in equal measures. It’s gaining popularity and many individuals are now using it as an alternative investment vehicle. In this article, we are going to understand what cryptocurrency is and the reasons why you should invest in cryptocurrency.
Let’s get started!
What is cryptocurrency?
Cryptocurrency is a digital asset or virtual currency that is used as a medium of exchange and is decentralized through the use of blockchain technology. There are different versions of cryptocurrencies in circulation globally but the most popular ones are Bitcoin and Ethereum.
Benefits of investing in cryptocurrency
- It offers higher returns
Although cryptocurrencies have been used as an alternative investment vehicle for a short time, they are so far the most profitable compared to the other traditional forms of investments. The prices of cryptocurrencies change drastically over a short period of time guaranteeing investors higher returns than what other asset classes offer.
For instance, the highest return one can get while investing in short-term stocks is considered to be about 20% of the initial value but with cryptocurrencies, there is no limit if the investor employs the right strategy.
When one is dealing with digital assets, the need to have a strong security system is paramount. Once you authorize a cryptocurrency transfer, it’s not possible to “charge-back” the transaction as is the case with most credit cards. Such measures keep fraudsters at bay. In case of an error, the return policy requires consent and agreement from the transacting parties before a refund is issued.
All cryptocurrency transactions are encrypted through blockchain technology and this guarantees safe transactions and investors’ privacy.
- Individual ownership
When you invest money through traditional banking or credit card system, you give stewardship of your funds to a third party. If there is any infringement of their Terms of Service, the third-party has a right to close or limit your financial account.
When you invest in cryptocurrency, your money is yours alone unless you want to delegate the management of your wallet. You will not require the consent of a third party anytime you want to hold or transfer your digital asset investments. Also, there are no exorbitant fees as it’s the case with the banking system thus, making it fully open and decentralized.
- High liquidity
Another great advantage of investing in cryptocurrencies is their high liquidity potential. Investors can buy and sell different versions of cryptocurrencies online with just a click of the button. There are user-friendly platforms and hundreds of tools including algorithm-based trading to help investors automate transactions.
- Easy application and use
Opening an account, transacting, and investing in cryptocurrencies is easy even for beginners thanks to user-friendly online applications and software. There are a lot of resources that help users learn important concepts such as mining and blockchain.
Bitcoin trading is widely compatible with smartphone and desktop devices and all transactions can be carried out in a safe Bitcoin wallet that is protected by encrypted codes. All cryptocurrency transactions are carried out on a peer-to-peer network, thus eliminating the need for middle-men and reducing transaction fees.
- It offers protection against inflation
All traditional currencies are affected by inflation but cryptocurrencies follow a different path. When the economy performs poorly, inflation increases, and investors of traditional currencies lose a considerable amount of money due to currency price fluctuations.
Since cryptocurrencies are limited in nature, they are released with a fixed amount thus, safeguarding against price volatility. For instance, there is about 21 million Bitcoin in the market and as the demand increases, so does the value.