Cryptocurrency is a virtual currency where individual coin ownership records are kept in a database secured by strong cryptography. Because of its special security feature, it is difficult to counterfeit. It is fully digital and is not issued or controlled by any central authority.
If you have been following the news, you might have heard a thing or two about the insane ups and downs of cryptocurrencies recently. It surely is a crazy year for those who invested in cryptocurrencies. Some have become filthy rich by investing in cryptocurrency, while some have lost a fortune during its downfall.
Bitcoin (BTC) and Ethereum (ETH) are two of the most popular types of cryptocurrency. Before the crash, Bitcoin’s price has soared more than 450% while Ethereum’s price has increased by more than 1,100% since October 2020. The wildness has subsequently extended to Dogecoin (DOGE), which skyrocketed by at least 12,000% since January 2021!
In May 2020, both Bitcoin’s and Ethereum’s prices plummeted by more than 45% from their highest points while those who bought Dogecoin at its highest price would have seen their wealth reduced by at least 55% had they not manage to cut loss in time.
Such volatility might be nerve-wracking to many investors, but it could also mean an opportunity for those who want in. The question here is, is cryptocurrency a good investment now? Here are some points to look at:
1) Cryptocurrency could be the next “it” thing
The previous surge in the price of Bitcoin is largely contributed by investors who believe that it is a scarce asset that could increase in value due to its limited supply of just 21 million coins. This is unlike paper money, which could be printed at the will of those governing the countries, causing its value to depreciate when more is printed.
Some even hold the view that Bitcoin could become the first currency accepted globally. If this view could actually come true, cryptocurrency investors could see themselves be very well rewarded in the coming years.
2) Cryptocurrencies are accepted for payments
Did you know that you could make payments using cryptocurrencies? Companies like Wikipedia and AT&T accept BitPay, which is a cryptocurrency payment processor, while Microsoft allows its users to top up their Microsoft accounts using Bitcoin.
Even one of the world’s largest accounting firm, PricewaterhouseCoopers has accepted its first payment in Bitcoin for its advisory services.
3) Diversification of portfolio
By investing in cryptocurrencies, you will see your investments more spread out across different assets and it reduces your exposure to one type of asset. This can help limit volatility in your portfolio over time and can allow an investor to balance the risk and reward better.
All in all, investing in cryptocurrencies has its own risks and rewards that should be measured carefully by an investor. The prices of cryptocurrencies may be attractive now but it is always better to do proper research and figure out your own risk appetite before making any investment decision.