Cryptocurrency has become much easier to acquire over the past few years. You might have friends who have started investing in it and might’ve also considered investing in it, but you’re stuck wondering if it is a good investment.
Before investing in something, it’s always important to understand what you’re getting yourself into.
How Do Cryptocurrencies Work?
Most transactions work today because the money typically passes through a third-party — usually a bank — to be processed and sent to the receiver’s account (meaning it’s “centralized”). But cryptocurrencies do away with the third party; if you send money to someone, it goes to them directly, without anyone in the middle (making it “decentralized”).
Instead of a bank verifying if a transaction is legitimate, cryptocurrencies use encryption on a distributed public ledger called the blockchain. This distributed public ledger keeps a record of all cryptocurrency transactions, is updated in real-time, and its data is publicly viewable. These make payments on a blockchain highly secure.
More companies globally are adopting blockchain and cryptocurrency, which might help you consider whether it’s worth investing in.
7 Reasons to Invest in Cryptocurrency
If you’re still unsure about investing in crypto, consider the points below.
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Start easily
Investing in the cryptocurrency market might seem daunting because its technology, concept, and use cases are unexplored and more complex for the regular investor.
In reality, it’s much simpler than you think to get started, with e-wallets and websites allowing anyone to begin investing. While the barrier to entry for investing is much lower, you should still follow investing best practices to protect your money, such as understanding your risk tolerance and researching market performance.
- Hedge against inflation
The maximum number of Bitcoin mined in circulation is 21 million, and no one can mine more once the cap is reached. This inherent scarcity enables Bitcoin to be an inflation hedge against cash, which your central bank can print, inflating the money supply and devaluing the currency.
- Diversify your portfolio
Cryptocurrency isn’t like your typical real estate or stock investment.
The cryptocurrency market generally operates separately from the traditional one. More often than not, cryptocurrency is shielded from events that pull down the centralized financial market because of its decentralized nature.
Thus, for instance, if your real estate investments perform poorly because of the market, your cryptocurrency investment may not be as affected.
- Participate in decentralized banking
A big reason cryptocurrency has gained massive support is because it can provide peer-to-peer, permissionless banking. Cryptocurrency experts see the potential of decentralized banking to decrease the need for central banking institutions and their control, censorship, fees, and oversight.
- Monitor your money
One of the best reasons you should invest in cryptocurrency is the underlying technology behind it, the blockchain. This technology allows for greater transparency that protects all parties in a transaction.
Payments made with cryptocurrency are made public by the blockchain. Everyone holds each other accountable, preventing transactions from being altered, deleted, or manipulated secretly. This technology can protect you from the typical problems you may experience with traditional exchanges, such as falsifying financial data and faulty valuations.
- Adapt to modern businesses
Despite years of skepticism about the technology, many online and brick-and-mortar merchants now accept Bitcoin.
The growing number of businesses investing in blockchain and cryptocurrency is a testament to the market’s belief in its technology. The technology is still nascent, but you can now go to selected stores supporting cryptocurrency and purchase actual goods by conveniently transferring the requested sum to a merchant.
- Become more future-proof
Experts believe crypto and blockchain technology will likely prosper and be continuously adopted as they become increasingly intertwined with traditional finance. An increasing number of businesses and eCommerce platforms are slowly integrating this technology. It means that your investments today will grow in its value over the years.
While the crypto market still has its fair share of volatility as it is yet to be regulated and explored further. Experts believe that the economics and network security of blockchain will become a more stable and accepted part of society and the mainstream economy in the coming years.
The Future of Finance
Cryptocurrency and blockchain technology has revolutionized how people see and approach finance, and their technological disruption has caused ripples throughout many industries.
It only makes sense to transition money into digital since almost everything else is doing the same. So, cryptocurrency and its technology could easily be the future of finance, and your investment in the industry would prove to be a rewarding move.
