How To Invest In Crypto Coins

Is Cryptocurrency a Good Investment?

Investing in virtual currency has produced jaw-dropping returns for some, only the field still presents risks.

By Anders Bylund – Updated Oct xix, 2022 at 11:05AM

Information technology is possible to go filthy rich by investing in cryptocurrency — just information technology is also very possible that you lot lose all of your money. Investing in crypto assets is risky, merely can be a good investment if yous do it properly and every bit role of a diversified portfolio.

Cryptocurrency is a practiced investment if y’all desire to gain direct exposure to the need for digital currency. A safer but potentially less lucrative alternative is buying the stocks of companies with exposure to cryptocurrency.

An infographic outlining risks of cryptocurrency, including cyberattacks, regulations, competition and volatilities.

Image source: The Motley Fool

Allow’south examine the pros and cons of investing in cryptocurrency.

Is cryptocurrency safe?

Multiple factors show that cryptocurrency is not e’er a safe investment. All the while, other signs are emerging that cryptocurrency is here to stay.

Cryptocurrency risks

Cryptocurrency exchanges, more than so than stock exchanges, are vulnerable to beingness hacked and becoming targets of other criminal activity. Security breaches have led to sizable losses for investors who have had their digital currencies stolen, spurring many exchanges and tertiary-party insurers to brainstorm offer protection against hacks.

Safely storing cryptocurrencies is too more hard than owning stocks or bonds. Cryptocurrency exchanges such as
(NASDAQ:COIN) brand it fairly piece of cake to buy and sell crypto assets such as
(CRYPTO:ETH), but many people don’t similar to go along their digital assets on exchanges due to the risks of allowing any visitor to control access to their assets.

Storing cryptocurrency on a centralized exchange ways you don’t have full control over your assets. An exchange 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 every bit hardware wallets, simply cold storage comes with its own set up of challenges. The biggest is the run a risk of losing your private key; without a fundamental, it’s impossible to access your cryptocurrency.

There’s likewise no guarantee that a crypto project you invest in volition succeed. Contest is fierce among thousands of blockchain projects, and many projects are no more scams. But a small percentage of cryptocurrency projects will ultimately flourish.

Regulators may as well cleft down on the entire crypto industry, especially if governments view cryptocurrencies as a threat rather than an innovative technology.

The cutting-border technology elements of cryptocurrency too increment the risks for investors. Much of the tech is still existence developed and is not nonetheless extensively proven in existent-world scenarios.

Cryptocurrency adoption

Despite the risks, cryptocurrencies and the blockchain manufacture are growing stronger. Much-needed financial infrastructure is being built, and investors are increasingly able to access institutional-form custody services. Professional and individual investors are gradually receiving the tools they need to manage and safeguard their crypto avails.

Crypto futures markets are being established, and many companies are gaining direct exposure to the cryptocurrency sector. Financial giants such equally
(NYSE:SQ) and
(NASDAQ:PYPL) are making it easier to buy and sell cryptocurrency on their pop platforms. Other companies, including Cake, accept poured hundreds of millions of dollars into Bitcoin and other digital assets.
(NASDAQ:TSLA) purchased $one.5 billion worth of Bitcoin in early 2021. By February 2022, the electric vehicle maker reported that it held almost $ii billion of the cryptocurrency.
MicroStrategy(NASDAQ:MSTR) — a business intelligence software visitor — 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 than with excess greenbacks generated from operations.

Although other factors however bear upon the riskiness of cryptocurrency, the increasing pace of adoption is a sign of a maturing industry. Individual investors and companies are seeking to gain direct exposure to cryptocurrency, considering it safe plenty for investing large sums of money.

Is crypto a good long-term investment?

Many cryptocurrencies such as Bitcoin and Ethereum are launched with lofty objectives, which may exist achieved over long time horizons. While the success of any cryptocurrency project is not bodacious, early investors in a crypto projection that reaches its goals tin can exist richly rewarded over the long term.

For whatsoever cryptocurrency projection, however, achieving widespread adoption is necessary to be considered a long-term success.

Bitcoin as a long-term investment

Bitcoin, every bit the most widely known cryptocurrency, benefits from the network effect — more people want to own Bitcoin because Bitcoin is owned by the most people. Bitcoin is currently viewed by many investors as “digital gilt,” but it could too be used every bit a digital course of greenbacks.

Bitcoin investors believe the cryptocurrency will gain value over the long term considering the supply is fixed, unlike the supplies of fiat currencies such as the U.S. dollar or the Japanese yen. The supply of Bitcoin is capped at fewer than 21 one thousand thousand coins, while most currencies can be printed at the will of central bankers. Many investors wait Bitcoin to gain value equally fiat currencies depreciate.

Those who are bullish most Bitcoin being extensively used as digital greenbacks believe it has the potential to become the first truly global currency.

Ethereum as a long-term investment

Ether is the native coin of the Ethereum platform and tin be purchased by investors wishing to gain portfolio exposure to Ethereum. While Bitcoin can exist viewed every bit digital gilt, Ethereum is building a global computing platform that supports many other cryptocurrencies and a massive ecosystem of decentralized applications (“dApps”).

The large number of cryptocurrencies congenital on the Ethereum platform, plus the open up-source nature of dApps, creates opportunities for Ethereum to also benefit from the network effect and to create sustainable, long-term value. The Ethereum platform enables the utilize of “smart contracts,” which execute automatically based on terms written directly into the contract code.

The Ethereum network collects Ether from users in substitution for executing smart contracts. Smart contract technology has meaning potential to disrupt massive industries such as real estate and banking and also to create entirely new markets.

Every bit the Ethereum platform becomes increasingly used worldwide, the Ether token increases in utility and value. Investors bullish on the long-term potential of the Ethereum platform tin profit direct past owning Ether.

That’s not to say Ethereum doesn’t accept competition. A number of “Ethereum Killers,” including
(CRYPTO:AVAX), are all built to handle smart contracts and employ a blockchain organization capable of processing more transactions per second. The speed has the added advantage of existence less expensive for users as 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’southward diversification since cryptocurrencies such every bit Bitcoin take historically shown few price correlations with the U.S. stock market. If you believe that cryptocurrency usage volition become increasingly widespread over time, then it probably makes sense for you to purchase some crypto directly as part of a diversified portfolio. For every cryptocurrency that you lot invest in, exist sure to have an investment thesis as to why that currency will stand the examination of time. If you do your research and acquire as much as possible well-nigh how to invest in cryptocurrency, yous should exist able to manage the investment chance as function of your overall portfolio.

If buying cryptocurrency seems too risky, you tin can consider other means to potentially profit from the rise of cryptocurrencies. You tin purchase the stocks of companies such as Coinbase, Block, and PayPal, or you tin can invest in an exchange like
CME Group
(NASDAQ:CME), which facilitates crypto futures trading.

Skilful Q&A

The Motley Fool: What advice would y’all requite to someone interested in investing in blockchain technology?

Be curious but also be cautious. Information technology is of import to recognize that in that location is not a complete regulatory framework in this area. Then, information technology is important to practice your homework. First, consider the venue that you utilize to access the marketplace. In that location are regulated crypto exchanges and trading places; nonetheless, in that location are also unregulated ones. 2nd, while nigh tokens are based on open-source lawmaking, it is non the example that they have the same disclosure regimes every bit blue flake stocks. And then, be conscientious and investigate the nature of the underlying token. Note that in other countries (Canada, Europe), at that place are ETFs and ETPs that rails crypto portfolios; these accept not received regulatory approval withal in the U.South. If and when they are offered to consumers, these will be a depression-cost way of accessing the crypto market, and then someone else will handle the market mechanics.

The Motley Fool: What advice would you give to someone interested in investing in blockchain technology?

Dr. Ozair:
Blockchain technology is definitely the future. In that location is no escaping that. All the same, it is difficult to predict which projects will last and which will fail and be forgotten.

Most blockchain technology companies are in their early, if non very early, stages. Hence, investing in companies utilizing blockchain technologies has all the aforementioned risks as investing in a starting time-up. And like in any kickoff-up, the risk-reward ratio is high.

Therefore, learn about blockchain engineering, do a thorough due diligence on any project — from its engineering science to business organisation model to execution. Learn about the “problem” it is trying to solve and what solution it’s offering — both from a technological perspective and a business concern perspective.

At that place’s a lot of potential with blockchain technology, but the execution is in the details.

The Motley Fool: Which industries, other than finance, practise you call back blockchain has the potential to disrupt?

Dr. Ozair:

The futurity that I have been envisioning is that every product or service awarding we know today will run on some form of blockchain technology. In other words, the “rails” of all products and services (i.e., the technology that “runs” these applications) will be a type of DLT.

I truly believe that in 10 to 15 years, this would be viable.

Like the internet, which has go a pivotal part of our everyday lives, and nosotros cannot imagine life without information technology, so volition DLT. When we use the internet, we do non enquire ourselves – “How does it piece of work?” or “Why should we utilise information technology?” – we simply use information technology for the mobility, flexibility, efficiency and connectivity it provides. The COVID-xix pandemic has underscored the Internet’south benefits. Information technology enabled us to connect to services, products and people and facilitated a polish transition to a remote, contactless global economy. At present Spider web 2.0 – Internet is evolving to Web 3.0 – Distributed Ledger Technology.

The Motley Fool: What innovations or trends in blockchain engineering science are yous most excited virtually?

Dr. Ozair:

The ecosystem of blockchain applied science is evolving very speedily. Every day (literally) you learn about new applications and new business use cases that have utilized blockchain technology. It is truly – slowly merely surely – being implemented in any industry and whatsoever “traditional” awarding. From finance to healthcare to retail to art to education, the implementations are dizzying.

The true power of blockchain technology is its ability to facilitate services to underserved communities and genuinely to democratize society. That was the premise of Bitcoin, when it was showtime launched in Jan of 2009 – i.eastward., a peer-to-peer payment system, and we somewhat lost focus on the principal purpose of blockchain engineering as” greed” got in the way.

The utilization of Decentralized Autonomous Arrangement (DAO) as the governance of any blockchain system and application, volition enable blockchain applications to provide the needs of the underserved communities, nationally and globally.

The Motley Fool: What advice would you give to someone interested in investing in blockchain technology?


Learn and keep learning. The developments in the space are happening at a rapid pace, then much so that new knowledge is being generated constantly. As a professor teaching blockchain, this is the hardest role, reinventing the class every semester, but information technology keeps my students and me as current every bit possible. This doesn’t hateful neglecting base knowledge; having this is crucial, as well equally some sense of the history to sympathize why developments have occurred at specific times.

Anders Bylund has positions in Bitcoin, Coinbase Global, Inc., Ethereum, Solana, and Tesla. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Block, Inc., Coinbase Global, Inc., Ethereum, PayPal Holdings, Polygon, Solana, and Tesla. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.

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