The high liquidity associated with Bitcoin makes it a great investment vessel if you are looking for short-term gains. Digital currencies can also be a long-term investment due to their high demand in the market. This is a form of financial derivative that entitles you to buy or sell bitcoin at a fixed price (known as the strike price) before a certain maturity date. Buying the coins (or the unit of a currency) on a cryptocurrency exchange is the most common way to invest in bitcoin.
We can speculate on the value that cryptocurrency may have to investors in the coming months and years (and many will), but the reality is that it is still a new and speculative investment, without much track record on which to base predictions. You can invest in cryptocurrency exchanges or even buy shares in companies that accept bitcoin as payment. Currently, many investors consider bitcoin to be digital gold, but it could also be used as a digital form of cash. And just because cryptocurrencies are new and interesting doesn’t mean you should invest in them, as people have been successfully saving and investing for retirement since long before cryptocurrencies existed.
Bitcoin, as the best-known cryptocurrency, benefits from the network effect: more people want to own Bitcoin because Bitcoin is owned by most people. The sharp drop in Bitcoin’s value in May is a perfect case study of the risks associated with investing in cryptocurrencies. Owning a cryptocurrency can increase the diversification of your portfolio, since cryptocurrencies such as Bitcoin have historically shown almost no price correlation with the U. Whatever your point of view, it cannot be denied that these cycles of “rise and fall” have been a feature of bitcoin’s entire existence, for which some big climbs and falls seem very likely.
There are also funds that have some exposure to bitcoin, as well as traditional assets such as stocks and bonds. For every cryptocurrency you invest in, make sure you have an investment thesis on why that currency will stand the test of time. Cryptocurrency is a good investment if you want to gain direct exposure to demand for digital currency, while a safer but potentially less lucrative alternative is to buy shares of companies with exposure to cryptocurrency. While Bitcoin may be seen as digital gold, Ethereum is building a global computing platform that supports many other cryptocurrencies and a massive ecosystem of decentralized applications (dapps).
Even so, many have invested in the currency with little caution despite their suspicions that its price is not anchored to its value. Market volatility is why investment experts recommend keeping any investment in cryptocurrencies at less than 5% of your total portfolio and never investing anything that you are not okay with losing.
