Cryptocurrency has truly taken the world by storm. While the first cryptocurrency (Bitcoin) was developed in 2009, it’s only recently started receiving significant attention. In 2017, the price per Bitcoin soared to $20,000. It then crashed the following year. Despite the plummet in price, Bitcoin and other cryptocurrencies (called Altcoins) have been seeing significant gains.
Today, cryptocurrency is used by many as a form of investment. It’s now considered an asset class, just like stocks and real estate. People are seeing the potential that Bitcoin and Altcoins have and they want in. There’s still a lot of confusion surrounding cryptocurrency, though. If you’re considering investing, here are five reasons why cryptocurrency has a good return on investment.
You Have Complete Control
The original purpose behind cryptocurrency was to act as a form of decentralized digital currency. It’s meant to allow for transactions without bank interference. Instead, you’re in complete control of your funds.
When it comes to investing, this control is beneficial. On a cryptocurrency exchange (which you can access from your computer), you can buy or sell whenever you want. You can create purchase orders or respond to ones already on the exchange. You can even use price tracking apps so that you can be alerted to prices changes immediately.
It’s important to note that while you have control over your funds, you do still have to pay taxes on it. Crypto is taxed like property, similar to stocks. You have to report your capital gains and losses and can be seen as tax fraud if you don’t. The taxation of crypto can be confusing. You can use crypto tax software to help make the process much easier.
There’s Major Growth Potential
Crypto might be new, but there is major growth potential. Many potential investors are a little wary of getting involved. Cryptocurrency and everything involved can be a bit intimidating to newcomers, which is why many potential investors shy away from it. This is one of the reasons why you should get involved. Getting in early gives you an advantage when it comes to experience as well as potential returns.
Larger Groups are Getting Involved
It’s not just individuals getting involved in cryptocurrency anymore. Larger institutions are starting to jump on the bandwagon. Big names like Fidelity and Goldman Sachs are starting to see the value in crypto. As these institutions start buying and holding onto cryptocurrency, the supply is going to become more limited. With a more limited supply, prices are likely to climb.
You Can Lend Crypto
The cryptocurrency exchange isn’t the only place where you can receive returns on your investments. Some platforms enable you to lend your crypto to other investors. You can create specific terms for a loan (such as the interest rate). Some platforms match you to investors who wish to borrow crypto. Keep in mind that lower interest rates are generally more attractive. If the demand for loans is high, however, you can often get away with a higher rate. You should also know that any crypto you lend out can’t be used for trading.
Crypto Can Be Placed in an Interest-Bearing Account
Another option you have that doesn’t involve trading is to store your crypto in an interest-bearing account. This can be beneficial in a couple of ways. First, the longer you hold onto your assets, the more the volatility decreases. You are better equipped to ride out the low periods and can generate a better long-term return. Not only that, but the crypto in the account earns interest. You’re likely to earn greater returns as the price of crypto increases while also earning interest on it.
Cryptocurrency is still fairly new when compared to other forms of investing, but that doesn’t mean that it’s any less profitable. It’s consistently outperforming other asset classes. That doesn’t mean that you should invest all of your money into crypto. It can offer you a great way to diversify your portfolio though.
More on this topic: Cryptocurrency: A New Investment Opportunity?