12 Advantages Of Investing In Cryptocurrency
Abstract
With the launch of Bitcoin in 2009, the cryptocurrency asset class emerged. The main benefit of investing in cryptocurrency is that Bitcoin and the majority of other cryptocurrencies based on blockchain technology don’t have a central authority, a payment processor, or a firm owner. Instead, peer-to-peer networks for cryptocurrencies enable direct transactions between users. In this guide, let’s look at the benefits of investing in cryptocurrency in detail.
Table Of Content
- What are the benefits of investing in cryptocurrency?
- Frequently asked questions
- Final takeaway
What Are The Benefits Of Investing In Cryptocurrency?
A 2020 research states that there are ~2300 businesses that accept bitcoin. A growing number of businesses worldwide are adopting bitcoin and other digital assets for various transactional, operational, and investment needs. This cryptocurrency guide aims to give you a general overview of the multiple benefits of investing in cryptocurrency. Therefore, it’s crucial to plan, be ready, and strategically participate in cryptocurrency if you plan to do so.
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1. Transaction speed
There aren’t many ways to transfer money or assets from one account to another more quickly than you can with cryptocurrencies if you want to send money to someone. In financial institutions, most transactions are settled in three to five days. Typically, a wire transfer takes at least 24 hours. In three days, stock trades are settled. However, one benefit of bitcoin transactions is that they can be finished quickly. The funds are ready for usage after the network has confirmed the block containing your transaction.
2. Transaction costs
Compared to other financial services, cryptocurrency transactions are comparatively inexpensive. For instance, a domestic wire transfer typically costs $25 to $30. Even more, money can be spent when sending money abroad. Transactions using cryptocurrencies are typically cheaper. You should know that the blockchain’s demand may increase transaction costs. Even on the busiest blockchains, median transaction fees are still less than wire transfer expenses.
3. Accessibility
Anyone can use cryptocurrency. An internet connection and a computer or smartphone are all you need. Comparing the process of creating an account at a conventional financial institution to set up a crypto wallet, the latter is rapid. There is no ID checking. There isn’t a credit or background check. With cryptocurrency, people who lack bank accounts can access financial services directly. People who don’t use traditional banking services may be able to send money to loved ones or conduct online transactions with ease by using cryptocurrencies.
4. Security
No one can sign transactions or access your funds unless they have access to the private key for your crypto wallet. However, there is also no way to get your money back if you misplace your private key. Additionally, due to the design of the blockchain system and the distributed computer network that verifies transactions, transactions are secure. The network gets safer as more processing power is added to it. Cryptocurrency account hacks frequently result from lax security at a centralised exchange. It’s safer to retain your cryptocurrency assets in your wallet.
5. Privacy
You can keep some privacy when using cryptocurrencies because you don’t need to sign up for an account at a financial institution. In many situations, having this much seclusion may be advantageous. However, once a wallet address is associated with an identity, the entire transaction history becomes visible. There are numerous approaches to hiding transactions and several privacy-focused coins to increase the privacy of cryptocurrencies.
6. Transparency
On the widely used blockchain ledger, all cryptocurrency transactions take place. Anyone can use tools to search transaction information, including the where, when, and quantity of cryptocurrency sent from a wallet address. Also visible to anyone is the amount of cryptocurrency kept in a wallet. Transparency, to this extent, can lessen fraudulent transactions. A person can demonstrate that they sent money and that it was received or that they have the necessary finances to complete a transaction.
7. Diversification
Compared to conventional financial assets like equities and bonds, cryptocurrency can provide investors with diversification. Although there is no historical data on how the cryptocurrency markets have performed in terms of equities or bonds, the values don’t seem to be associated with those of other markets. They could be an excellent source for portfolio diversity because of this. You can provide more consistent returns by mixing assets with low price correlation. Your crypto asset may increase if your stock portfolio decreases, and vice versa. Still, if your asset allocation is too heavily skewed toward cryptocurrencies, it may wind up making your entire portfolio more volatile.
8. Easy Transactions
Cryptocurrency transactions are simpler, cheaper, and more private than most other transactions. Anyone can send and receive a variety of cryptocurrencies using a straightforward smartphone software, hardware wallet, or exchange wallet. Using cryptocurrency doesn’t necessarily require a bank account. People may use cash to purchase bitcoin at an ATM and transmit the coins to their phone.
9. Exponential Industry Growth
The cryptocurrency market has had some of the quickest growth in our lifetimes. Being involved now may be likened to being associated with businesses at the forefront of the internet in the 1990s and early 2000s. In 2013, the market capitalisation of all cryptocurrencies was roughly $1.6 billion. It increased to approximately $1.4 trillion by June 2021.
10. Outsized Returns
It’s no secret that over the past 12 years, Bitcoin has outperformed all other assets. Almost no value existed when Bitcoin first started in 2009. It would increase over the ensuing years to a mere penny, and then to tens of thousands of dollars. This represents gains in the millions of percentage points. In contrast, the average annual return on the S&P 500 stock index is roughly 8%. Prices in the cryptocurrency market have been volatile, which has been one of the main advantages of cryptocurrencies for day traders and speculators.
11. Inflation Hedge
The limited quantity of mineable cryptocurrencies like Bitcoin, Litecoin, and Monero, to mention a few, is supposed to make them ideal inflation hedges. More scarce things tend to increase in value because monetary inflation can happen when central banks and governments generate more money, increasing the supply. The price of these fixed-supply coins, measured in dollars, has a larger likelihood of rising as more and more fresh dollars compete with fewer and fewer coins.
12. Cross-Border Payments
National boundaries are irrelevant to cryptocurrencies. Without any additional difficulties, a person in one nation can send coins to a person in another country. Transferring money across international borders can be time-consuming and expensive with conventional financial institutions. Due to rules, penalties, or conflicts between particular nations, doing so might not even be possible in some circumstances.
Although there are many advantages of investing in cryptocurrency, you should consider multiple things before investing in cryptocurrency. Investing without proper research will put your capital at risk. Here is a crypto investment guide for beginners.
Frequently Asked Questions
Is cryptocurrency a profitable investment in 2022?
In 2021, cryptocurrency markets had highs and lows. Analysts believe that investors should keep diversification in mind when choosing assets. Cryptocurrency is a permanent trend. Investors must make choices, participate in the global financial system, put more emphasis on research, and consider cryptocurrencies as a component of a diversified portfolio.
What are some notable benefits of crypto investment?
As mentioned above, some of the notable benefits of investing in cryptocurrency are:-
- Transaction speed
- Transaction costs
- Accessibility
- Security
- Privacy
- Transparency
- Diversification
Still, there are notable benefits of investing in cryptocurrency. But learn a lot before leaping into the crypto world. There are thousands of crypto investment guides available online to brush up on before investing.
Is short-term or long-term investment beneficial?
As both have advantages and disadvantages, there is no obvious winner in this case. With lower risk, short-term investments enable you to reach your financial objectives quickly. On the other side, you might choose long-term investing opportunities if you have a larger risk tolerance and prefer higher returns.
Final Takeaway
The benefits of investing in cryptocurrency mentioned above are just a few more significant ones. Of course, there could be problems, with its volatility being a considerable drawback. Before participating in the crypto market, anyone interested in purchasing, selling, or trading cryptocurrency would be advised to conduct their study.
