Despite the Risks, Cryptocurrencies and the Blockchain Industry Are Going Strong.
Crypto futures markets are being established, and many companies are getting direct exposure to the cryptocurrency sector. Financial giants like Block (NYSE:SQ) and PayPal (NASDAQ:PYPL) make it easy to buy and sell cryptocurrencies on their popular platforms. Other companies, including Block,
It
has poured hundreds of millions of dollars into Bitcoin and other digital assets. Tesla (NASDAQ:TSLA) bought Bitcoin worth $1.5 billion in early 2021. By February 2022, the electric vehicle manufacturer has reported that it has almost $2 billion worth of cryptocurrencies. MicroStrategy (NASDAQ:MSTR) – a business intelligence software company – has been accumulating Bitcoin since 2020. It has held $5.7 billion in cryptocurrency by the end of 2021 and says it plans to buy more with excess cash from operations.
Are Cryptocurrencies a Good Long-Term Investment?
Many cryptocurrencies, such as Bitcoin and Ethereum, are being released with high targets that can be achieved over long time frames.
Bitcoin as a long-term investment
Bitcoin, the most widely known cryptocurrency, is affected by the network effect. Day by day, investors are buying Bitcoin, which creates a network effect and makes it possible for more people to buy Bitcoin. Bitcoin is currently seen as “digital gold” by many investors, but it can also be used as a form of digital cash.
Bitcoin investors believe that it will appreciate in value in the long term. While the supply of Bitcoin is limited to 21 million coins, most currencies can be minted at the request of central bankers. Many investors expect Bitcoin to appreciate in value over time.
Those who are optimistic about the widespread use of Bitcoin as digital cash believe that Bitcoin has the potential to become the first true global currency.
Ethereum as a long-term investment
Ether,
It
is the native currency of the Ethereum platform and can be purchased by investors who want to gain portfolio risk to Ethereum. While Bitcoin can be seen as digital gold, Ethereum is building a global computing platform that supports many other cryptocurrencies and a large ecosystem of decentralized applications (“dApps”).
The large number of cryptocurrencies created on the Ethereum platform, as well as the open-source nature of dApps, create opportunities for Ethereum to benefit from its network impact and create sustainable, long-term value. The Ethereum platform enables the use of “smart contracts” that are automatically executed according to the terms written directly into the contract code.
The Ethereum network collects Ether from users in exchange for executing smart contracts. Smart contract technology has significant potential to disrupt huge industries such as real estate and banking, as well as create entirely new markets.
As the Ethereum platform becomes increasingly used around the world, the value of the Ether token is increasing
Polygon(MATIC)
and a number of “Ethereum Killers” including
Avalanche (AVAX)
were created to process smart contracts and use a blockchain system that can process more transactions per second. Speed also has the advantage of being cheaper for users. But Ethereum is the most widely adopted platform for using smart contracts.
Should You Invest in Cryptocurrency?
Since cryptocurrencies like Bitcoin have historically had little price correlation with the U.S. stock market, owning a little cryptocurrency can increase the diversification of your portfolio. If you believe that the use of cryptocurrencies will become increasingly common over time, it probably makes sense to buy some crypto directly as part of a diversified portfolio. If you do your research and learn as much as you can about how to invest in cryptocurrency, you can manage investment risk as part of your overall portfolio.
