Reasons Why You Should Invest In Cryptocurrency

Cryptocurrencies are a relatively new asset class that started with Satoshi Nakamoto inventing the Bitcoin blockchain in 2009. However, they have gained immense popularity over the years, with an estimated 27 million Americans currently owning cryptocurrency. You may have come across cryptocurrency as an investment option if you have recently researched the best areas to pump your money into. Many people remain skeptical, but here’s why many experts think you should invest in cryptocurrency regardless.

Invest In Cryptocurrency

Before Investing in Cryptocurrency…

There’s a lot to consider before taking the plunge–  from which coins to invest in, to how to store and manage your assets.

Cryptocurrency Wallets

The first thing you’ll need before you can start investing in cryptocurrency is a digital wallet to store your coins. A cryptocurrency wallet is simply a software program that allows you to send, receive, and manage your digital assets.

There are many different types of wallets available, each with its own advantages and disadvantages. For example, some crypto wallets are designed for security and offer advanced features like multi-signature transactions, while others are more user-friendly and easier to set up.

The most important thing to look for in a wallet is whether it supports the coins you want to invest in. Some wallets only support a few coins, while others support hundreds.

Cryptocurrency Exchanges

Once you have a wallet set up, you’ll need to find a place to buy and sell your coins. This is where cryptocurrency exchanges come in.

A cryptocurrency exchange is an online platform that allows you to buy, sell, or trade digital assets for other assets or fiat currencies (like US dollars). There are many different exchanges available, each with its own selection of coins and features.

When choosing an exchange, it’s important to consider things like fees, security, and ease of use. You’ll also want to make sure that the exchange supports the coins you want to invest in.

Cryptocurrency Trading

Once you have a wallet set up and have found an exchange to buy and sell coins, you’re ready to start trading.

Cryptocurrency trading is the process of buying and selling coins in order to profit from price changes. When you buy a coin, you’re betting that its price will go up in the future. If it does, you can sell it for a profit.

Similarly, if you think a coin’s price will go down, you can sell it now and buy it back at a lower price later. This is called short selling, and it can be a great way to make money if you’re correctly predicting price movements.

Of course, there’s always the risk that the price will move against you, in which case you’ll lose money. This is why it’s important to do your research before you start trading and to only invest money that you can afford to lose.

Taxes on Cryptocurrency Investments

Finally, it’s important to be aware of the taxes you may owe on your cryptocurrency investments.

In the United States, the IRS has classified digital assets as property, which means they’re subject to capital gains taxes. This means that if you buy a coin for $1,000 and sell it later for $2,000, you’ll owe taxes on the $1,000 profit.

The exact amount you’ll owe will depend on things like your tax bracket and how long you held the coin before selling it. However, it’s generally advisable to set aside a portion of your profits each time you sell in order to cover your tax liability.

What to Know About Investing in Crypto

Huge growth opportunities

The immense potential for growth is undoubtedly one of the biggest perks of investing in cryptocurrency. Sure, most stocks can give you moderate returns over time, but very few asset classes compare to crypto. Indeed, new currencies emerge all the time, and many of them record massive rises in value. It isn’t uncommon for even more stable options like Ethereum and Bitcoin to grow at incredible rates.

For instance, Bitcoin began 2022 with almost twice as much value as it had in January 2021. Consequently, although crypto is high-risk, it may be a savvy investment to secure your family’s financial future if you have a very secure income. However, remember to vet cryptocurrencies before investing in them because newer currencies have a higher chance of going under.

Exponential industry growth

There is no denying that the crypto sector is one of the fastest-growing markets. The industry’s total market cap was about $1.6 billion in 2013, but it rose to more than $1.4 trillion by June 2021. Consequently, being involved with cryptocurrency can reasonably be compared to backing corporations on the leading edge of the internet way back in the ’90s and early 2000s.

Also, Eric Puiler, Web3 specialist, and other experts agree that cryptocurrency will play a central role in the much-anticipated new decentralized version of the internet. Therefore, this industry will only continue to grow. So you will most likely benefit from holding a lot of cryptocurrency in the years ahead.

Cryptocurrency is an excellent way to diversify

Crypto investments, such as ETH CAD, are a great way to diversify from traditional asset classes like stocks and bonds. Although there’s a limited history of the crypto market’s price action relative to stocks and bonds, the prices seem to be uncorrelated with other markets. As such, they are a good way to diversify your investments.

You can combine assets with minimal price correlation, like ETH CAD, to boost your chances of more steady returns. This way, your crypto assets may shoot up when your stock portfolio goes up, and vice versa. Nevertheless, ensure that your asset allocation isn’t too crypto-dominated to prevent its volatility from making your entire portfolio more volatile.

Great inflation hedge

Experts consider Litecoin, Bitcoin, and other mineable cryptocurrencies with limited supply cap excellent hedges against inflation. Monetary inflation occurs when governments and central banks print more money, ensuring that scarce things will become more valuable.

Consequently, as money supply outpaces crypto supply, the dollar value of these digital currencies will likely go up, making them an excellent hedge against inflation.

Despite these persuasive reasons to invest in cryptocurrencies, it is important to conduct thorough research to gain more information before making your decision.