Why do people invest in cryptocurrency?
GOBankingRates recently surveyed 1,037 Americans to learn if they invest in cryptocurrency and what some of their primary goals are for investing in digital currency. Some of their top goals included the ability to diversify portfolios, build savings, make a quick fortune and make money for specific goals like education or travel.
Here are some goals, plus a few more, you can reach when investing in cryptocurrency.
Diversify Portfolios
If you’re looking for a way to diversify your portfolio beyond the typical basket of stocks and bonds, investing in cryptocurrency can provide you with this unique opportunity.
Chris Kline, COO and co-founder at Bitcoin IRA, said there’s an interest surge in investing in cryptocurrency to diversify portfolios, particularly retirement portfolios. This is likely due to expectations around the rise and growth in digital assets in the near and long-term future, and its overall enthusiastic customer base.
“At least some exposure to cryptocurrency is quickly becoming a prerequisite to a modern portfolio,” Kline said. “When addressing today’s economic uncertainty, cryptocurrency can offer diversification and an alternative path forward for people of all ages.”
Equity Potential
Patricia Trompeter, CEO of Sphere 3D, said one of the main reasons people invest in cryptocurrency is that it has equity potential. This means there’s a possibility of a high return on investment.
Long-Term Store of Value
Jenny Ta, CEO of HODL Assets, said most cryptocurrencies, unlike fiat money, have a limited supply capped by mathematical algorithms.
“Like stocks, they’re speculative investments, so there’s a lot of volatility and risk,” Ta said. “But the returns can potentially be much higher and the turnaround time much faster. It’s a matter of high growth over a short period.”
Ta uses the example of 2021’s Dogecoin frenzy. Cryptocurrency investors who had bought just $1,000 in Dogecoin in January or February had at least $14,600 by mid-May that same year.
“You can’t do that with stocks,” Ta said. “The long-term growth can’t be beaten by any other asset class.”
Transaction Freedom
Investing in crypto provides investors with a lot of transaction freedom, something that cannot be offered by most traditional banks. If you need cash, Trompeter said crypto and its related exchanges are both easy to access and liquidate.
“And cryptocurrency is censorship-resistant,” Ta added, “meaning anyone can send money peer-to-peer, 24/7, without any third-party interference.”
Cryptocurrency Is Reliable
The reliability of crypto is another reason people are choosing to invest in digital currencies. Because there is a finite supply of bitcoin, Trompeter said, it is a long-term and stable form of currency that cannot be subjected to dilution from inflation by political or government agencies.
“One of the top reasons people invest in cryptocurrency is partially because of the allure of gains,” Kline added, “and because of crypto’s finiteness as a potential safeguard against inflation.”
It’s a Social Experience
If you’ve noticed all your friends and family beginning to invest in crypto, you might feel compelled to join in to avoid FOMO and be part of the viral effect.
Tahem Verma, co-founder and CEO of Mesha, said owning crypto is a social experience. Investors get to be part of a community and engage with others around the world.
“When the richest person in the world touts a coin across social media and talks about it on ‘Saturday Night Live’ or people hear of friends who have made 50x, 100x or more getting involved early in a hot altcoin, it draws others into the market,” said Ryan Hansen, head of sales for Mercury Digital Assets. “Like investing in stocks, everyone wants to buy low and sell high and have a story about how they got in early on the next big thing.”
You Own What You Buy
“Many tokens provide you with governance and ownership of the product,” Verma said. “This means that you are not only a user of the product but also an owner.”
Today, people have alternative asset options that veer differently than traditional assets. Kline said cryptocurrency has the potential to be like the internet: foreign and unrelatable at first, but inevitably ubiquitous and imperative.