Is it September already? Time goes by, and since the future is unclear for many of us, individuals wonder whether it is still a wise choice to invest in crypto in the second half of 2022.
The truth is that the crypto space is a sort of unexplored terrain, with prices going up and down on a daily basis. Volatility has always been a crucial aspect people are afraid of when it comes to digital currencies, and while some make considerable gains out of it, others go bust at the drop of a hat. Needless to say, this June’s Bitcoin crash burned many investors. The so-called stablecoins experienced wild price movements, making people doubt their future. Investors also question their investments, so these last months of 2022 are going to be a bit confusing.
Let us shed light on the current status of cryptocurrency so that you can have a clearer idea of what is worth and what is to be forgotten.
Benefits of investing in cryptocurrency
Many people believe that cryptocurrencies are pointless investments, but there are arguments that state the contrary.
Diversification is one of the most significant advantages of investing in digital currencies. It is essential to diversify the risks by investing in several assets that behave distinctively under the same economic conditions. Some people consider cryptocurrency a powerful tool against rising inflation, with Bitcoin and Ethereum at the top. Bitcoin is designed as a hedge against price rises, as central banks cannot subjectively manipulate it, its supply is foreseeable, and it is incredibly easy to access. Once crypto technology establishes its fundamentals, many digital currencies are expected to become hedges against inflation.
There is a new asset class on the horizon as digital currencies mature and evolve (Bitcoin and Ethereum are already there). These coins were established as a new asset class, being widely adopted. Moreover, large professional fund managers, including Cathy Wood from Ark Investment Management, developed dedicated investment funds exclusively investing in Bitcoin and altcoins.
Do not forget that the crypto sector is in its early stages, so the upside potential of digital currencies is likely to happen. What does this upside potential mean? It is the ability of an asset investment to increase in value. One pertinent example is represented by the stablecoins connected to the value of assets and fiat money to support cryptocurrency.
Risks of investing in cryptocurrency
As in the case of any investment, there are risks. But these risks are manageable if you consider some important aspects before buying. So, take your research seriously and look at the crypto price, market capitalization, actual utility, liquidity, and regulations. Financial regulators and governments can change the faith of a particular crypto. For example, El Salvador and the Central African Republic adopted Bitcoin as official currency, but countries such as Indonesia and Bolivia banned the use of this currency. Virtual coins can also be the subject of social media hype, being endorsed or advertised by famous people as a way to get rich. In this case, it is easy to fall into the trap of buying an overrated cryptocurrency.
Volatility is the most noteworthy risk in crypto, as it can lead to either considerable returns or big-time losses. The best you can do is to inform thoroughly before buying the digital asset that has caught your interest. Bitcoin, for example, is the world’s largest cryptocurrency at the moment, but this does not mean you do not have to check it. Like many other digital currencies, the crypto’s king is volatile, so it would be wise to assess, among others, Bitcoin price today, trading history, and market cap before investing.
Scams are another impairment that, unfortunately, has increased lately. Only Santander UK alone recorded about £1 million–worth of cryptocurrency scams in November 2021. But frauds happen everywhere, and just like in the case of other financial investments, you must watch for pitfalls and inform seriously before embarking on a buying journey.
Bitcoin as a long-term investment
Bitcoin is the most popular existing cryptocurrency; it is, in fact, the first digital currency ever. Called often “digital gold”, Bitcoin is considered one of the safest crypto investments due to its high liquidity and fixed supply. This means there is an established amount of Bitcoin, 21 million more precisely, that is not going to multiply or vanish anywhere. Besides, it was globally adopted, starting to be embraced by numerous companies as a form of payment, including Home Depot, Microsoft, Virgin Airlines, PayPal, and Etsy. Bitcoin reached an all-time high in November 2021, while its lowest dip was in December 2018. Between these points, Bitcoin continued to fluctuate up and down, but not in such a dramatic manner.
Some experts predict that Bitcoin has so much potential that it can experience astronomical growth in the future, all the more so since fiat currencies start to depreciate.
Ethereum as a long-term investment
You have learned what gives Bitcoin value, but what about its younger brother, Ethereum? It is the most popular altcoin in the market, but should this come as a surprise? Ethereum provides users various opportunities, including building decentralized applications (dApps), which transform it into a global computing system. Plus, the platform can support many other digital currencies.
Ethereum’s long-term value is expected to exceed boundaries as Ethereum 2.0 is on its way. On September 15, people will witness a significant transformation in the crypto space: Ethereum switches from PoW to PoS. This transformation will be a game changer predicted to increase the platform’s long-term value and that of its native currency ether (ETH) used to pay the “gas fees”.
Other significant cryptocurrencies
Some other cryptocurrencies to direct your attention to this autumn include:
- Cardano (ADA)
- Tether (USDT)
- Ripple (XRP)
- Bitcoin Coin (BNB) developed by Binance
- Solana (SOL)
- Dogecoin (DOGE) (Elon Musk embraced DOGE earlier this year, followed by many other companies, so yes, it seems this coin has a lot of adoption potential)
Regardless of the uncertainties, cryptocurrency is still a good investment. Coins such as Bitcoin, Ethereum, and Dogecoin are estimated to reach new heights in the following times.