Is Crypto the Right Investment for You?

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A rational and responsible adult person should at one point start saving and investing money.

Once you decide to do so, you might not know where to look first and how to diversify your investments. 

While it’s relatively easy to find relevant tips and advice on traditional investments, the situation with new options is a bit different. 

Cryptocurrencies, for instance, are new digital assets that are often a subject of controversy. 

In this analysis, we’ll share some positive and negative sides of making investments in crypto.

How Do Crypto Investments Work?

Cryptocurrencies are digital assets that are neither released nor controlled by any central bank. As completely decentralized currencies, their value depends on sheer supply and demand, based on a network of innumerable computers and related operations through which a ledger on blockchain technology is created.   

No matter if you opt for Bitcoin, Dogecoin, Ethereum, or a new crypto to invest in, it’s good to know that you don’t have to buy an entire coin, so to speak. Let’s say that you want to invest $200 in Bitcoin. At the time of writing of this article, this would amount to 0,000017 BTC, since 1 BTC is worth $59,800. As many newbies to the crypto world are curious about this, yes, you can buy a fraction of a Bitcoin. However, if you were to buy a newer coin like Pepe Unchained, you could own thousands of coins. Currently, this coin is trading at $0.01031, so your $200 would get you more than 19,000 Pepe Unchained. 

This affordability of cryptocurrencies has made them popular with millions of people worldwide. As of June 2024, the number of identity-verified crypto asset users worldwide surpassed 600 million, and we can assume that some crypto buyers didn’t provide their identity details.

Where to Invest in Crypto Assets?

Now that we’ve explained how crypto investments work, let’s see where you can actually buy cryptocurrencies and other crypto-related assets. 

The most obvious stop on this investing spree is crypto exchange platforms. As highlighted above, the investor funds their account with fiat money and it’s then converted into a cryptocurrency. 

Another reasonable investment option is to buy shares of crypto-mining companies or manufacturers of equipment used in mining. Their value is narrowly connected to the value of crypto, so buying their stocks would be a combination of traditional and tech-based investing. 

Additional two cents: Cryptocurrency mining is the procedure of adding new blocks to the blockchain. Miners resolve complex computational puzzles through their computers. The fastest ones receive rewards in the form of transaction fees and newly minted bits of the cryptocurrency in question.

Crypto Between Investments and Speculations

As defined by Investopedia, an investment is an item obtained to generate income or gain an increase in the value of the acquired item over time. It’s important to define the time in which return on investment is expected, the effort, and the invested money for a predictable profit in the future. 

So, do crypto investments meet these demands? The answer is not universal. For instance, in March 2024, Bitcoin was at its all-time high: 1 BTC = $73,000. In November 2021, it exceeded $69,000, only to drop to $46,000 at the end of December that same year. 

However, in November 2022, the worth of Bitcoin dropped to barely $16,000 per Bitcoin. 

So, if you invested the $200 from the example above in BTC at that time – also called the bear period, when the value is low – and sold your BTC bit in March 2024 during the bull market, you’d get around $880. Hence, the value of your investment would grow three times over a period of four months. This is more than an investment in most compaby stocks would bring back in the same interval. 

That being said, it’s almost impossible to predict when the value of cryptocurrencies will plummet. And when they go down, they can plunge very quickly, as we saw at the beginning of August this year, when Bitcoin and Ethereum went down by 15% and 22%, respectively, in less than 24 hours, losing $367 billion in value altogether. 

To Invest or Not to Invest?

When compared with traditional long-term investments, such as investing in the S&P 500 Index or buying company stocks, cryptocurrencies can bring a significant return on investment in a shorter time. However, the fact that they can doesn’t mean they will bring such profits. Still, crypto comes in handy as a payment method that enables quick transfers and withdrawals. 

If you’re one of the crypto users you could invest in crypto assets. Again, go with the amount of fiat or crypto money that won’t affect your cash flow. 

And if you’re new to the crypto world and don’t completely understand how all this works, it would be wiser to start investing in traditional markets and assets. As you gather enough knowledge of crypto and blockchain – and market-specific insights – don’t hesitate to add crypto investments to your portfolio.