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It is possible to get filthy rich by making a financial investment in cryptocurrencies, but it is also very possible that you will lose all your money.
Investing in crypto assets is risky, but it can be a good financial investment if you do it correctly and as part of a diversified portfolio.
Cryptocurrencies are a good financial investment if you want to gain direct exposure to the demand for digital currency.
A safer, but potentially less profitable alternative is to buy shares in companies with exposure to cryptocurrency.
Many cryptocurrencies, such as Bitcoin and Ethereum, are launched with lofty goals, which can be achieved over long-term horizons.
While the success of any cryptocurrency project is not guaranteed, early investors in a cryptocurrency project that achieves its goals can be richly rewarded in the long run.
For any cryptocurrency project, however, achieving widespread adoption is necessary to be considered a long-term success.
Is investing in Bitcoin a good financial alternative?
Bitcoin, as the most well-known cryptocurrency, benefits from the network effect, more people want to own Bitcoin because is owned by most people.
Currently, Bitcoin is seen by many investors as “digital gold”, but it can also be used as a digital form of money.
Bitcoin investors believe that the cryptocurrency will gain value over the long term because the supply is fixed, unlike supplies of fiat currencies such as the US Dollar or Japanese Yen.
Bitcoin supply is limited to less than 21 million coins, while most coins can be printed at the discretion of central bankers.
Many investors expect Bitcoin to gain value as fiat currencies depreciate.
Those who are optimistic about Bitcoin being widely used as digital money believe it has the potential to become the first truly global currency.
Should you invest in cryptocurrencies as a financial strategy?
Owning some cryptocurrency can increase the diversification of your portfolio, as cryptocurrencies such as Bitcoin have historically shown few price correlations with the US stock market.
If you believe that the use of cryptocurrencies will become more and more widespread over time, it probably makes sense to buy some cryptocurrencies directly as part of a diversified portfolio.
For every cryptocurrency you invest in, make sure you have a financial investment thesis on why that coin will stand the test of time.
If you do your research and learn as much as possible about investing in cryptocurrency, you can manage investment risk as part of your overall portfolio.