Last Updated on 25th March 2022
Right now, cryptocurrency is all the rage. Everyone seems to be talking about cryptocurrency and its potential to make you rich.
But is cryptocurrency a good investment? And will it be around for the long haul?
In this blog post, we’ll take a look at cryptocurrency and discuss whether or not it’s a smart long-term investment choice.
We’ll also explore some of the risks associated with investing in cryptocurrency and offer our advice on how to best approach this new investment opportunity.
What is cryptocurrency?
First, let’s deal with what cryptocurrency is…
The term “cryptocurrency” refers to a type of digital currency. There is, however, one significant difference. They live solely on the internet, with no physical embodiment.
Cryptocurrencies are a way to make secure, anonymous, and cheap transactions. In fact, they can be sent anywhere in the world with minimal fees since there is no bank involvement.
People from all around the world can work together by using cryptocurrencies in their business activities without needing to trust each other first. All they need is a clear set of guidelines for how much each party should pay or earn.
Cryptocurrencies have faced a number of challenges on their road to success such as price fluctuations due to speculation and regulatory restrictions around the world. Despite all these issues, they continue gaining popularity since they allow for secure transactions without transaction fees.
How to invest in cryptocurrency?
If you want to invest in a cryptocurrency, there are a few ways you can do it. Firstly, you could buy and sell them at an exchange similar to the ones for trading stocks or shares, such as Binance, Coinbase, eToro, or BlockFi.
This is the most common method of buying into crypto because it’s simple and quick -you essentially just need to sign up and deposit money.
You can use fiat currency (USD, GBP, etc.) or you could use an existing cryptocurrency like Bitcoin as the transfer of funds. You then need to decide which currency you want to invest in – maybe you want to buy BNB, Bitcoin or maybe purchase Litecoin etc. Some cryptocurrencies only accept payment in their own coins, but some allow you to use other cryptocurrencies like Litecoin, or Ether.
Secondly, you could purchase mining equipment and set it up to mine the currency for yourself. The advantage of this is that you receive the currency as a reward for your work – but it can be expensive and time-consuming (and often requires specific technical knowledge), so unless you’re willing to put in the work just for the sake of it, this might not be an option you want to consider.
Thirdly, you could join a mining pool. A mining pool is essentially a more organized way of doing the same thing as mining solo – so rather than everyone competing against each other, they all share resources and split the rewards between them at the end of each month.
This third option is essentially a win-win situation – because the workload is shared, it becomes less demanding and therefore easier to achieve, plus you also get your rewards split too so everyone wins! Many people are making significant amounts of money through mining pools every day – if that sounds exciting to you, you might want to consider it.
Finally, you could purchase cryptocurrency through an Initial Coin Offering (ICO) – these are similar to IPOs in that individual investors can receive tokens or coins which represent a share of the company. So rather than just receiving profits as mining pools do, they also receive additional benefits like voting rights, future dividends, or even the ability to use their token as currency for trading on other exchanges.
ICOs are exciting because they often enable you to buy into companies before they hit the stock market, so there’s a lot of potential for making money – but also a big risk that it ends up like Pets.com (although that’s not likely because most ICOs are actually carefully screened by the company they’re investing in, and most investors tend to do their research rather than just throwing money at something randomly).
Is Cryptocurrency a good long-term investment
The price of cryptocurrencies swings wildly, which makes them very volatile for short-term investments.
In 2014, two men bought 2 pizzas for 10,000 bitcoins. If they kept those coins until today and sold them at their current price then it would have been a nearly $20 million dollar purchase!
Of course, that’s just an anecdote to show you how volatile cryptocurrencies can be. The market is also extremely unpredictable, so don’t expect this kind of return on your own investments anytime soon.
But if you’re looking into holding onto your cryptocurrency for months or even years, then cryptocurrencies can provide much higher returns than any other investment.
The main downside (and risk) with cryptocurrencies is that government regulators may decide to crack down on them at any time. This could all be part of the global economic reset that’s currently happening. If you want to hold onto your cryptocurrency as an alternative payment method or fiat hedge in case there’s another meltdown — now might be the best time to purchase before its prices surge again.
Since the cryptocurrency market is still in its infancy and is very volatile, it’s best to divide your investment across multiple cryptocurrencies like Bitcoin, Ethereum, and Cardano (which also make great long-term investments). This way you’re reducing risk by spreading your money out with three different cryptocurrencies all of which perform well in different ways.
It’s important to understand that these currencies are not stocks or companies that you can measure with traditional valuation metrics like dividend yield or P/E ratio; however, there are other factors that can bring these cryptocurrency coins’ values up over time. For example, Ethereum has a value token called “ether” that allows for decentralized transactions within applications on the Ethereum blockchain. As more people use this network, the likelihood of ether increasing in value will go up.
Bitcoin is still the most traded cryptocurrency out there, but it’s slowly losing market share to other coins that offer faster transaction speeds, have more features, and are more environmentally friendly.
The Bottom Line
Cryptocurrency is still an extremely volatile method of investment, and it’s not recommended to put your money into it long term unless you have extra to spare and want to take a chance on the currency skyrocketing in price over time. If you do decide to invest, only put in what you can afford to lose since nobody knows for sure how cryptocurrencies will change or grow over time.
Please do your own research before making any investments. Learn as much as possible about the different currencies available, the technology behind them, and how they’re performing at that moment in time, before making an educated decision.