Is Cryptocurrency a Good Investment? | The Motley Fool

NEWS ALERT: In a late consultation, a top official of the U.S. Secret Service said that the agency has confiscated more than $ 102 million of cryptocurrency assets from criminals since 2015. The investigations are reportedly similar to tracking condemnable emails, and the Secret Service has seized crypto in 254 different cases during this time period. Some investors were shaken by the statement while others applauded the efforts to catch criminals and build trust in the cryptocurrency market .
It ‘s possible to get filthy rich by investing in cryptocurrency in 2022 — but you could besides lose all of your money. Investing in crypto assets is bad but besides potentially extremely profitable .
Cryptocurrency is a full investment if you want to gain direct photograph to the demand for digital currency. A safe but potentially less lucrative alternative is buying the stocks of companies with vulnerability to cryptocurrency .
Let ‘s examine the pros and cons of investing in cryptocurrency.

Is cryptocurrency safe?

several factors make cryptocurrency a not entirely safe investment. however, early signs are emerging that cryptocurrency is here to stay .
Risk of cryptocurrency

Cryptocurrency risks

Cryptocurrency exchanges, more so than stock certificate exchanges, are vulnerable to being hacked and becoming targets of other condemnable activity. security breaches have led to goodly losses for investors who have had their digital currencies stolen, spurring many exchanges and third-party insurers to begin offering protective covering against hacks .
safely storing cryptocurrencies is besides more difficult than owning stocks or bonds. Cryptocurrency exchanges such as Coinbase ( NASDAQ : COIN ) make it fairly easy to buy and sell crypto assets such as Bitcoin ( CRYPTO : BTC ) and Ethereum ( CRYPTO : ETH ), but many people do n’t like to keep their digital assets on exchanges due to the risks of allowing any company to control access to their assets .
Storing cryptocurrency on a centralize exchange means you do n’t have full dominance over your assets. An substitution could freeze your assets based on a government request, or the exchange could go bankrupt and you ‘d have no recourse to recover your money .
Some cryptocurrency owners prefer offline “ cold storage “ options such as hardware wallets, but cold storage comes with its own set of challenges. The biggest is the hazard of losing your private identify ; without a key, it ‘s impossible to access your cryptocurrency .
There ‘s besides no guarantee that a crypto project you invest in will succeed. Competition is cutthroat among thousands of blockchain projects, and many projects are no more than victimize. only a small percentage of cryptocurrency projects will ultimately flourish .
Regulators may besides crack down on the entire crypto industry, particularly if governments view cryptocurrencies as a threat quite than an innovative technology .
The up-to-date technology elements of cryptocurrency besides increase the risks for investors. much of the technical school is still being developed and is not however extensively proven in real-world scenarios .

Cryptocurrency adoption

Despite the risks, cryptocurrencies and the blockchain industry are growing stronger. Much-needed fiscal infrastructure is being built, and investors are increasingly able to access institutional-grade hands services. Professional and individual investors are gradually receiving the tools they need to manage and safeguard their crypto assets .
Crypto futures markets are being established, and many companies are gaining direct exposure to the cryptocurrency sector. fiscal giants such as Block ( NYSE : SQ ) and PayPal ( NASDAQ : PYPL ) are making it easier to buy and sell cryptocurrency on their popular platforms. other companies, including Block, have poured hundreds of millions of dollars into Bitcoin and early digital assets. Tesla ( NASDAQ : TSLA ) purchased $ 1.5 billion deserving of Bitcoin in early 2021. By February 2022, the electric fomite godhead reported that it held about $ 2 billion of the cryptocurrency. MicroStrategy  ( NASDAQ : MSTR ) — a business intelligence software company — has been accumulating Bitcoin since 2020. It held $ 5.7 billion in the cryptocurrency by the end of 2021 and said it plans to buy more with overindulgence cash generated from operations .
Although other factors placid affect the riskiness of cryptocurrency, the increasing pace of adoption is a sign of a mature diligence. individual investors and companies are seeking to gain aim exposure to cryptocurrency, considering it condom adequate for investing large sums of money .

Is crypto a good long-term investment?

many cryptocurrencies such as Bitcoin and Ethereum are launched with gallant objectives, which may be achieved over long clock time horizons. While the success of any cryptocurrency project is not assured, early investors in a crypto project that reaches its goals can be high rewarded over the long term .
For any cryptocurrency project, however, achieving far-flung borrowing is necessity to be considered a long-run success .
Bitcoin as a long-term investment
Bitcoin, as the most wide known cryptocurrency, benefits from the network effect — more people want to own Bitcoin because Bitcoin is owned by the most people. Bitcoin is presently viewed by many investors as “ digital gold, ” but it could besides be used as a digital form of cash .
Bitcoin investors believe the cryptocurrency will gain measure over the long term because the supply is fixed, unlike the supplies of decree currencies such as the U.S. dollar or the japanese ache. The supply of Bitcoin is capped at fewer than 21 million coins, while most currencies can be printed at the will of central bankers. many investors expect Bitcoin to gain value as decree currencies depreciate .
Those who are bullish about Bitcoin being extensively used as digital cash believe it has the likely to become the first rightfully ball-shaped currency .
Ethereum as a long-term investment
Ether is the native coin of the Ethereum chopine and can be purchased by investors wishing to gain portfolio photograph to Ethereum. While Bitcoin can be viewed as digital aureate, Ethereum is building a global computer science platform that supports many other cryptocurrencies and a massive ecosystem of decentralized applications ( “ dApps ” ) .
The large number of cryptocurrencies built on the Ethereum chopine, plus the open-source nature of dApps, creates opportunities for Ethereum to besides benefit from the network impression and to create sustainable, long-run value. The Ethereum platform enables the function of “ smart contracts, ” which execute mechanically based on terms written directly into the contract code.

The Ethereum network collects ether from users in exchange for executing smart contracts. Smart contract technology has meaning likely to disrupt massive industries such as real estate and banking and besides to create wholly newly markets .
As the Ethereum chopine becomes increasingly used global, the Ether keepsake increases in utility and value. Investors bullish on the long-run electric potential of the Ethereum platform can profit immediately by owning Ether .
That ‘s not to say Ethereum does n’t have competition. A total of “ Ethereum Killers, ” including Solana ( CRYPTO : SOL ), Polygon ( CRYPTO : MATIC ), and Avalanche ( CRYPTO : AVAX ), are all built to handle chic contracts and use a blockchain system capable of processing more transactions per irregular. The travel rapidly has the add advantage of being less expensive for users ampere well. But Ethereum is the most broadly adopted platform for using smart contracts .

Should you invest in cryptocurrency?

Owning some cryptocurrency can increase your portfolio ‘s diversification since cryptocurrencies such as Bitcoin have historically shown few price correlations with the U.S. breed commercialize. If you believe that cryptocurrency usage will become increasingly far-flung over time, then it probably makes common sense for you to buy some crypto directly as part of a diversify portfolio. For every cryptocurrency that you invest in, be certain to have an investment thesis as to why that currency will stand the trial of time. If you do your research and learn adenine much as potential about how to invest in cryptocurrency, you should be able to manage the investing risk as part of your overall portfolio .
If buy cryptocurrency seems besides bad, you can consider other ways to potentially profit from the rebel of cryptocurrencies. You can buy the stocks of companies such as Coinbase, Block, and PayPal, or you can invest in an exchange like CME Group ( NASDAQ : CME ), which facilitates crypto futures trade. Although investments in these companies may be profitable, they do not have the same top electric potential as investing in cryptocurrency immediately .

Expert Q&A

The Motley Fool sought blockchain insights from three finance experts : Dr. Christine Parlour, professor and Sylvan C. Coleman Chair of Finance and Accounting at the Haas School of Business, University of California, Berkeley ; Dr. Jimmie Lenz, director of Duke University ‘s Master of Engineering in FinTech and Master of Engineering in Cybersecurity ; and Dr. Merav Ozair, who is a leading blockchain technical and a FinTech Professor at Rutgers Business School .
The Motley Fool: What advice would you give to someone interested in investing in blockchain technology?
Dr. Christine Parlour, professor and Sylvan C. Coleman Chair of Finance and Accounting at the Haas School of Business, University of California, Berkeley

Be curious but besides be cautious. It is significant to recognize that there is not a complete regulative framework in this area. then, it is crucial to do your homework. First, consider the venue that you use to access the market. There are regulated crypto exchanges and trade places ; however, there are besides unregulated ones. Second, while most tokens are based on open-source code, it is not the case that they have the same disclosure regimes as bluing nick stocks. so, be careful and investigate the nature of the underlying keepsake. note that in other countries ( Canada, Europe ), there are ETFs and ETPs that track crypto portfolios ; these have not received regulative blessing so far in the U.S. If and when they are offered to consumers, these will be a low-cost way of accessing the crypto marketplace, and then person else will handle the market mechanics .
Dr. Jimmie Lenz, Director of Duke University's Master of Engineering in FinTech and Master of Engineering in Cybersecurity. Dr. Lenz is an experienced executive, lecturer, and scholar in the field of banking and capital markets, so we asked him a few questions about DeFi and blockchain.

Learn and keep determine. The developments in the space are happening at a rapid yard, thus much so that new cognition is being generated constantly. As a professor teaching blockchain, this is the hardest separate, reinventing the path every semester, but it keeps my students and me ampere current as possible. This does n’t mean fail base cognition ; having this is crucial, deoxyadenosine monophosphate well as some smell of the history to understand why developments have occurred at specific times .

Dr. Merav Ozair

Blockchain engineering is decidedly the future. There is no escaping that. however, it is unmanageable to predict which projects will last and which will fail and be forgotten .
Most blockchain technology companies are in their early, if not very early, stages. Hence, investing in companies utilizing blockchain technologies has all the same risks as investing in a start-up. And like in any start-up, the risk-reward proportion is high .
consequently, learn about blockchain engineering, do a thorough due application on any plan — from its technology to commercial enterprise exemplar to execution. Learn about the “ problem ” it is trying to solve and what solution it ‘s offer — both from a technological perspective and a business perspective.

There ‘s a draw of potential with blockchain engineering, but the execution is in the details .

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Category : Finance

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