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Why Invest in Cryptocurrency in 2021 – What You Must Know
Many people have profited off of their investment and trading of cryptocurrency. However, it is undeniably a risky investment because of the market’s high volatility. So, the buying and selling prices consistently fluctuate.
That said, if you’re savvy with staying on top of the market exchange, then you should invest in cryptocurrency in 2021 because the prices for currencies like Bitcoin are starting to rebound.
This article explains the possible benefits you could see with your investment.
Understand the Risks of Investing in Crypto
Before getting into why you should consider investing in crypto, it’s crucial that you understand the risks of this investment. Crypto is a “high risk; high reward” type of investment. It’s significantly riskier than investing in stocks because there’s a lot of speculation involved.
However, when you monitor the market carefully and trade and invest at the right time, you can surely make a lot of money.
It’s in your best interest to determine your risk tolerance before you purchase crypto. So, you may want to reconsider this investment if you’re an investor that’s not willing to take high risks and potentially lose money.
Why Invest in Crypto in 2021
If you’re ready to take the risk of investing in crypto, here are some reasons why it’s a good idea to invest in crypto in 2021. Consider the following points and determine whether your investment can prove lucrative in the long term.
More Companies are Accepting Crypto as Payment
If you follow crypto news closely, you may have learned that more popular companies are accepting crypto as payment for their products and/or services than ever before. In addition to that, there has been a rise in the number of users that have adopted the Blockchain wallet since 2019.
Therefore, the rapid increase and the greater acceptance of Bitcoin and other crypto indicates that cryptocurrency’s popularity is not at risk.
In fact, Tesla owner, Elon Musk, has also flirted with the idea of purchasing Tesla vehicles using Dogecoin earlier this year. Moreover, his interest in this crypto itself has caused its price to increase significantly.
Ethereum (ETH) Offers Decentralized Finance
Ethereum (ETH) currently has a crypto market share of 18%, which is second to Bitcoin’s 47% market share. ETH is the leading platform for decentralized finance (DeFi).
So, it gives users the ability to make smart contracts that are executed automatically when the specific conditions are met.
What this means is that third parties such as brokerages, banks, and clearinghouses can be excluded. As a result, ETH can be a platform for investment in which you can save a bit of money.
As more people are considering DeFi, there’s going to be an increase in this platform’s usage. So, it can be beneficial for you to invest in crypto in 2021.
You can also use the platform to make and exchange non-fungible tokens (NFTs), issue new cryptocurrencies, and do other things.
For those who don’t know, NFTs are ownership certificates for digital assets, which include videos, music, and artwork traded over the blockchain. Therefore, you can sell and purchase them on marketplaces. Moreover, the ETH network generates unique IDs for NFTs, guaranteeing their authenticity.
Investments in Bitcoin Have Increased Over Time
Reports have indicated that more investors purchased Bitcoin through platforms such as Cash App and PayPal have increased steadily. The Bitcoin revenue for Cash App has reached $1.6 billion. In a recent report, Cash App disclosed that its gross profit was approximately $30 million during the Q3 of 2020.
It’s Easy to Measure Bitcoin’s S2F
Another reason to invest in crypto 2021 is that it’s relatively easy to measure Bitcoin’s “stock to flow” (S2F). S2F is a method used to quantify the precise amount of a good’s scarcity. The stock represents the entire supply that is in circulation.
On the other hand, the flow is representative of the new supply amount each year. Bitcoin is an open-source cryptocurrency and has a fixed supply schedule.
Therefore, you can measure Bitcoin’s S2F accurately to even 100%.
Crypto Is Suited for the Macro Environment
The macro environment includes trends in inflation, the gross domestic product (GDP), spending, employment, and monetary and fiscal policy. Cryptocurrency was created during the global financial crisis of 2008 to 2009.
Therefore, it served as a means to facilitate bank and government bailouts, and it thrived during that time. Now that there is another financial crisis due to the pandemic and many governments are going through crises and bailouts, it’s a good time to invest in cryptocurrency in 2021.
This is because this virtual currency is best suited in such an environment and offers a unique value proposition, especially during times of crisis.
Investing in Crypto Safely
You should also be aware of how to safely invest in crypto if you’ve decided to put some money into it. So, the first thing you must do to be strategic about your investment is to invest an amount of money that you can afford to lose, realistically.
Of course, there are never any guarantees with investments, and that is even lower in the case of crypto. So, you don’t want to end up losing more money than you can afford.
In addition, you should also have an emergency fund with money from 3 to 6 months’ worth of savings. This way, you can keep your money invested even when the prices drop extremely low and ride it out until the prices recover.
Cashing out your investment when the price is low is going to put you at a great loss.
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