Cryptocurrencies have been described as a transformative technology that could revolutionize a number of industries. The blockchain technology underlying bitcoin and other cryptocurrencies has been hailed as a potential gamechanger for a large number of industries, from shipping and supply chains to banking and healthcare .By removing intermediaries and trusted actors from computer networks, distributed ledgers can facilitate new types of economic activity that were not possible before.This potential makes for an attractive investment to people who believe in the future of digital currencies. For people who believe in that promise, investing in cryptocurrency represents a way to earn high returns while supporting the future of technology. Let’s delve into the primary reasons why cryptocurrencies should be considered in your investment portfolios.
HEDGE AGAINST INFLATION: weakening fiat currencies over the years has contributed to investors seeing cryptocurrencies as s store of value.Governements of the world keep printing money out of thin air inflation would only get worse despite several efforts being made to curb it. Although investors looking to hedge against inflation have traditionally bought certain commodities, especially gold; however, Bitcoin and other crypto assets could be on its way to displacing gold as the preferred hedge against general hyperinflation for a new generation. In fact, Bitcoin is probably a far better solution than gold for those in less-developed countries. Already, we’ve seen El Salvador formally adopt Bitcoin as legal tender, and Panama recently introduced a bill that would have it follow suit. Crypto use has also surged recently in Afghanistan, after this summer’s Taliban takeover caused citizens to lose faith in the country’s financial system.
ENABLING NEW INNOVATION: cryptocurrency also has the potential to enable entirely new digital finance (DeFi) applications. And these innovations have the potential to create serious wealth. One of the more obvious ways DeFi can make a difference is by lowering transaction costs for traditional financial applications, such as cross-border remittances. In fact, this was one of the main reasons El Salvador adopted Bitcoin. The country uses the dollar, so its currency probably isn’t at risk of hyperinflation in the near term. However, President Nayib Bukiele has stated that Bitcoin could save El Salvadoreans $400 million annually on saved remittance costs.
Besides streamlining traditional financial transactions, crypto is also opening up entirely new markets, most notably in nonfungible tokens. NFTs are digital works of art or digital items authenticated as “original” through the use of crypto-enabled smart contracts, on smart contract blockchains such as Ethereum (CRYPTO: ETH) or newer Ethereum competitors such as Cardano (CRYPTO: ADA) or Solana (CRYPTO: SOL). By being able to authenticate a particular digital image or item as an “original” on a blockchain, Ethereum and its descendants are now creating an entire new market for digital items where there was none before.
GAINING ACCEPTANCE AMONG MAINSTREAM FINANCIAL INSTITUTIONS: A recent study by Fidelity found that seven in 10 institutional investors plan to buy digital assets in the future. Earlier this month, analysts at Bank of America gave their official approval to recognize cryptocurrency as an asset class, becoming just the latest large U.S. bank to do so. Around the same time, U.S. Bancorp said it will be offering crypto custody services to its fund manager clients. Even Blackrock, the world’s largest asset manager, has invested $400 million in Bitcoin mining stocks such as Marathon Digital Holdings (NASDAQ: MARA) and Riot Blockchain (NASDAQ: RIOT) in several of its funds.
Though there are reasons to be cautious when wanting to invest in cryptocurrencies which is high volatility, and it’s a risky investment class but as the saying goes “No risk no reward”. There is no investment class without any form of risk though but crypto assets are usually more riskier but offer better returns both in the short and long run if you play the game well, So if you’re going to invest in cryptocurrencies, make sure you’re sizing your position appropriately for such downside scenarios, and always invest what you are willing to lose .