Cryptocurrencies create very different reactions in investors, and while some are very keen on the investments and are constantly looking for ways to add these assets to their portfolios, others remain skeptical, believing that the price changes and fluctuations make cryptocurrencies fundamentally unreliable for the long term. And while it is definitely important to be aware of the potential risks, it cannot be denied that digital coins are getting more and more adherents every day. Even institutional investors have begun accumulating crypto, something that the majority of analysts wouldn’t have believed to be possible only a few years ago.
The growth of exchanges like Binance empowers potential investors to look into the top cryptocurrency offers that exist on the market in order to determine if there are any that would be good for their portfolios. Being able to rely on these trustworthy platforms is very important, since users shouldn’t have to deal with the possibility of endangering their capital when trading, a scenario that is very likely to occur if they rely on unknown exchanges.
But general security isn’t the only thing investors care about. Since the market is known for changing so fast, many have also begun to wonder if they haven’t already missed their chance and if there’s no point investing in cryptocurrencies anymore, as the possibility of accumulating gains is close to non-existent.
Understanding crypto
Cryptocurrencies are digital assets based on decentralized systems and cryptography. Having the ability to ensure the completion of perfectly secure online payments is one of the main reasons why traders joined this ecosystem in the first place, as cryptocurrencies are guarded by public-private key pairs, hashing functions, and elliptical curve encryption. The blockchain is central to the functionality and appeal of all cryptocurrencies, as it arranges data in blocks (as its name suggests), which cannot be modified or edited in any way after they have been completed.
The network-wide validation makes it almost impossible for transactions to be forged in any way, with the contents needing to be agreed upon by a network of separate nodes that exist on the computers that maintain the blockchain. While crypto coins share some of their characteristics, they were all designed and launched for different purposes. For instance, Ethereum was created to be used as payment in order to open blocks and validate transactions, while Bitcoin acts more as a traditional currency, being essentially the same as any fiat coin, only in digital format.
After Ethereum switched to proof-of-stake, it developed a new use case, as it can be utilized as a staking mechanism now as well. XRP’s native cryptocurrency, on the other hand, was created to facilitate money transfers between institutions that are separated by geographical boundaries.
Is it too late to invest?
Most cryptocurrencies exhibited consistently high performance this year, but some investors are still wondering whether there’s any point in entering the market right now. It’s true that many believe that crypto’s best days are behind it, and that if you haven’t invested up until that point, then you have utterly missed your chance. However, many analysts consider this view to be overly pessimistic and not in line with reality. They point out that the backdrop has changed rather significantly over the last few years. The introduction of the exchange-traded funds was a game-changer in the ecosystem, as it allowed investors to have regulated access to cryptocurrencies via brokerage and even retirement accounts. As a result of these changes, large quantities of capital can now flow into crypto, something that is expected to continue exerting positive pressure on the prices in the long run.
Volatility has also decreased slowly but surely over the last months as a result of institutionalization. However, while that does make the market more secure and predictable, some believe that it has the potential to minimize gains as well, a downside that traders naturally don’t want to deal with. Analysts point out that just because volatility levels are not as steep as they used to be, it doesn’t mean that returns can no longer be considered as well, and that the market is just as profitable, if not more so, as a result of the sizable value appreciation.
Choose wisely
While it isn’t too late to invest in cryptocurrencies, it doesn’t mean that you should be haphazard in your choices. Being disciplined is a must for any crypto investor, so make sure to do your research and be committed to letting your assets grow. Avoiding FOMO is one of the most important things you can do. Make sure that the assets you choose are well-known and have large market cap figures. Anything else is typically unnecessarily risky, a feature that doesn’t necessarily come with high returns as well.
Assess your goals from the very beginning to determine how you’ll go forward and to build a customized strategy that allows you to evolve. You can also expand your reach by looking into characteristics that many traders, unfortunately, don’t take into account. One of them is the ability to ensure sustainability. This refers to both the capacity to act as a long-term asset, as well as the potential for a reduced environmental impact.
Cryptocurrencies have been criticized by environmental activists since their earliest days due to the large amount of energy they consume to mine new coins and finalize transactions. The switch from proof-of-work to proof-of-stake has been estimated to have reduced carbon footprints by 99%, being one of the reasons why the measure was adopted in the first place. Switching to renewable energy is the next step, as less than 30% of mining is fueled by green energy.
One of the reasons why crypto remains popular and a good investment opportunity is that people regard it as an innovator that promotes financial inclusion via its decentralization and accessibility.
To sum up, if you haven’t invested in cryptocurrencies yet, you should know that you’re not too late. Digital coins remain popular, but make sure you come up with a good strategy that lets you make the most of what the marketplace has to offer, too.