The most common question among newcomers is “Should I invest in cryptocurrencies and bitcoins? It can also be accompanied by questions: “What are cryptocurrencies?”, “Can cryptocurrencies be considered a serious investment, or is it just a form of speculation?
Before you answer “yes” or “no” to the first question, you first need to deal with the last two, which will lead you to a decision that is right for you.
What is a cryptocurrency in brief for beginners?
A cryptocurrency is a form of decentralized digital currency that can be used as a legitimate means of payment – for example, to repay debts or buy goods and services. You can view cryptocurrencies as a cross between an ordinary fiat currency (e.g. US dollar) and an asset such as Amazon stock.
There are already more than 2000 different cryptocurrencies, the first and most famous of which is Bitcoin.
Can cryptocurrencies be considered a serious investment? Or is it just pure speculation?
Yes, cryptocurrencies can be a serious investment. However, there are some key differences between investing in cryptocurrencies and conventional investments. Here are some of them:
- Cryptocurrencies are all digital, so there is no such thing as paper money;
- Cryptocurrency exchanges are not insured at the state level, for example, as they do with banks. If someone breaks into your account or your stock exchange closes, the government is not obliged to reimburse you for the money lost;
- Cryptocurrencies are decentralized. This means that they are not tied to any country or government agency, which allows owners of cryptocurrencies to conduct transactions without government oversight. On the one hand, this is an advantage, but on the other hand, you do not have the option of cancelling unauthorised transactions;
- The history of price volatility (instability) is not so great, so traditional technical analysis may not work until the market itself has “matured”;
If you see cryptocurrencies as an asset, then you are betting on the blockchain technology that these digital currencies are built on. However, the fundamental analysis for cryptocurrencies will be very different from the fundamental analysis of traditional assets.
On the myths of investing in cryptocurrencies
Now we can ask if traditional investors can consider adding cryptocurrencies to their investment portfolios. The answer will depend on the person you ask. Here are some myths about investing in cryptocurrencies:
- “Warren Buffett thinks that Bitcoin is fraud, so I shouldn’t invest in it.
Warren Buffett recently compared Bitcoin to a button on his jacket, saying that the value of Bitcoin is not really higher.
However, it is also possible to talk about gold and $100 note, which people use to trade. Still, Buffett is investing in gold, isn’t he?
On the other hand, Warren Buffett encourages people to invest only in things they know and understand well. He himself still uses a folding phone. He probably doesn’t understand how to use cryptocurrencies for the benefit of the world’s “non-bank” population, which could have done well without the use of smartphones.
Even JP Morgan CEO Jamie Diamond, who called Bitcoin “fraud” back in 2017, did not give up introducing digital currency into his company. And Buffett didn’t say anything about the other 2,000 altcoins, which he might not mind!
Everyone now seems to think that cryptocurrencies (not just Bitcoin) are the future. Perhaps you should invest in them, too, although you need to understand them well and be able to choose the right time to buy and sell coins.
- “I should not invest in cryptocurrencies because the government or the central bank do not support them.
The whole point is cryptocurrency and it is that these are assets that are not supported by the government.
Imagine you have business, money in the bank and a lot of property. And suddenly the government has been overthrown, and the country is beginning to live by completely different rules and laws. Most likely, the new government will freeze your bank accounts and take away your property. These things will no longer belong to you, because they are easy to capture and say that they are no longer yours.
What of your past wealth will you be able to pass on to your children? Almost nothing. But if at least part of your money was in Bitcoin, which no government can get to, then it’s different!
For example, U.S. citizens are somewhat behind in crypto adoption compared to the rest of the world. The reason is the higher level of trust in the government, which means that they are not afraid that the government may freeze their assets tomorrow. This is why they do not appreciate the opportunities offered by the cryptocurrencies.
Why invest in cryptocurrency now 2020
Now that we’ve dispelled some of the major myths about investing in cryptocurrencies, let’s look at some of the reasons why you should NOT invest in cryptocurrencies!
Haters become active supporters. As we said, JP Morgan CEO Jamie Diamond called Bitcoin fraud back in 2017. But now his company is creating its own cryptocurrency.
Even the U.S. government is beginning to realize that it will not be able to resist the global recognition of the cryptocurrencies and is now actively seeking ways to regulate the cryptocurrency industry.
Cryptocurrencies are increasingly recognizing the cryptocurrencies. Every day we hear about new trading firms that accept cryptocurrencies such as Bitcoin as payment.
Here are some examples:
- Mastercard creates a debit card with bitcoins;
- Fidelity is committed to offering cryptotrading;
- The U.S. is committed to optimal regulation in this industry;
- More and more people are learning about cryptocurrencies from the media and the Internet;
- More and more women around the world are becoming involved in the cryptographic industry. This is the half of the world’s population who like to spend money, and now the cryptocurrencies.
How Much to Invest in Bitcoin: 4 Factors to Consider in 2020
If you want to invest in cryptocurrencies, here are a few things to remember:
Find out how tolerant you are to risk. The first thing you need to do is to find out how much you want to invest. Cryptocurrencies are volatile investments. This is still a relatively new market in which assets can make huge fluctuations in a day. Depending on their tolerance for risk, the amount of investment may vary from person to person. Cryptocurrencies may represent 15% of your total investment portfolio.
Learn. Before you start investing / taking risks, you need to get to know the world of cryptocurrencies well and understand what your every move means and what it is all about. You need a general knowledge of cryptocurrencies, markets and trading, not what the marketers are pushing for coins.
Choose a cryptobirch that you can trust. Explore the information about cryptobearches and choose the one you really want to trust. This is a kind of research work that should lead you to certain conclusions about these platforms. These can be Coinbase, Binance, Kraken and others. When it comes to stock exchanges, it is also worth resorting to some diversification, because there are many cases of hacking, and there are even cases where the owners of stock exchanges die carrying away their purse passwords.
Create a diversified portfolio. Next, you need to decide what kind of cryptocurrency you will invest in. Although Bitcoin is one of the most famous digital assets, there are more than 2000 other cryptocurrencies, also known as alto-currencies, that are also worth exploring. The market for cryptocurrencies is similar to that of the dotcom era. In the long run, some of these cryptocurrencies will succeed and others may disappear. Perhaps along with the “dying” coin you will have in your hands a couple of tokens that will make you significantly rich in the long run.