It is possible to get rich by investing in digital money or cryptocurrency in today’s world. But people could also lose all their money investing in this non-physical currency. How can both be possible? Investing in these assets is pretty risky but can potentially increase people’s profit portfolio.
These online currencies are good investments if people want to gain direct access or exposure to the demand for online money. A safe but less lucrative alternative is to purchase the stocks of firms with crypto exposure. Let us take a closer look at the advantages of investing in this type of industry.
Is it safe?
Some factors make cryptocurrencies not entirely safe, while other signs are showing that it is here to stay.
Risks
Crypto exchanges, just like stock exchanges, are always at risk of getting hacked and become a primary target for criminals. These security risks have led to significant losses for a lot of investors who have had their digital money stolen. Storing crypto safely is also more challenging compared to owning bonds or stocks.
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Exchanges such as Coinbase make it pretty easy to purchase and sell cryptocurrency assets like Ethereum, Bitcoin, or HODL. Still, a lot of individuals do not like to keep their online assets on exchange platforms because of the risks mentioned above of theft and cyber-attacks.
Some asset owners prefer offline options or cold storage like paper or hardware wallets, but these offline options come with their own set of trials. The biggest of these challenges is the risk of losing private keys. Without these keys, it is impossible to access the crypto wallet.
There is also no guarantee that a project they invest in will have the success they are hoping for. Competition is pretty tight among hundreds, even thousands of blockchain, and these projects that are fraudulent in nature or scams are also very popular in this industry.
Only a couple of projects will eventually flourish or succeed. Government agencies or regulators may also hammer down the entire industry, especially if they start to strongly see it as a threat instead of just innovative future technology. Not only that, with crypto being based on modern and cutting-edge techs that also increases the threat or risk for investors since this technology is still under development and is not yet entirely proven in real-life scenarios.
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Crypto adoption
Despite these risks, both the cryptocurrency and blockchain industry are pretty consistent when it comes to growth and is still getting stronger by the minute. Much-needed infrastructure is being designed and built, and investors are able to access institutional-grade services.
Individual and professional investors regularly receive the hardware and software they need to safeguard and manage their assets. Various markets are being put in place, and a lot of firms are starting to gain direct exposure to this sector. Financial institutions like PayPal and Square are making it easier to purchase and sell coins on their popular platforms.
At the same time, other organizations such as square have collectively invested millions of dollars in digital assets. Tesla purchased $1 billion worth of cryptocurrency at the start of the year. While other elements still impact the risk of this industry, the increasing rate of adoption is a good sign that the industry is maturing. People and organizations alike are looking to gain direct exposure to crypto, considering investing significant amounts of money is pretty safe.
Is it a good investment?
A lot of currencies like HODL token are launched with high objectives, which may be achieved for a long time. While the success of these projects is not assured, if a project achieves its goals, early investors could become rich, rewarded over the long term. But for any project, achieving widespread adoption is needed to be considered as long-term success.
Should people invest in this industry?
Owning some crypto can increase portfolio diversification because these things have shown almost no price correlations with the United States stock exchange. Suppose people believe that the usage of these things will become increasingly high in the next couple of years.
In that case, it makes a lot of sense for individuals to purchase some digital currencies directly as part of their diversified portfolio. Every online currency that people invest in needs to make sure they have an investment thesis as to why it will stand the test of time.
If purchasing cryptocurrencies seem pretty risky, individuals can consider other ways to profit from the rise of this industry. For example, people can purchase stocks of firms such as PayPal, Square, Coinbase or invest in exchanges such as CME Group, which helps facilitate features trading. While investments in these organizations may attract profit, they don’t have the same potential as investing in this industry directly.