Last year, it was estimated that 34 million Americans owned crypto and one can only expect the number to be higher at the close of 2023.
If you’ve hesitated to pull the trigger and start investing in crypto, this guide is for you. You’re likely still wondering, is crypto a good investment?
We’ll break down why cryptocurrency investing has become popular and why it might work for you. We’ll also discuss the risks of crypto so you can understand both sides of the argument.
Here’s what to know about how to invest in crypto:
1. There’s Bitcoin And Then There’s Crypto
As of this writing, the words ‘Bitcoin’ and ‘crypto’ are often used interchangeably by the mainstream media.
When asked about Bitcoin, you’ll often hear critics claim that crypto is nonsense or that it’s a scam that’ll soon die a deserved death.
We must first distinguish between the two. Bitcoin refers to a specific digital currency. This digital currency was invented by Satoshi Nakamoto and has the acronym BTC.
All other virtual currencies are lumped under the catch-all term ‘crypto’ or ‘altcoins.’ When deciding to choose a crypto investment, you must determine where you should put your money.
Now let’s break down what makes these two categories of virtual currencies different.
2. Why Bitcoin Was Made
Bitcoin was made in the wake of the 2008 financial crisis. This is a response to the fiat currency system that currently enslaves us all! Why do we say that this system enslaves us?
Our current financial system forces us to use our fiat currency. This is the national currency that’s created by your country’s central bank. This includes the Federal Reserve in the US and the Bank of England in the UK, for example.
The problem with these fiat currencies is that they lose their value due to inflation. As central banks increase the money supply, your fiat currency loses its value. You need to earn more just to enjoy the same standard of living.
Bitcoin is an alternative to this system. For many investors, it’s a superior form of money.
If you’re interested in buying Bitcoin, you want to use a Bitcoin ATM. You can discover more online about how they work.
3. What Crypto Offers
There’s a strong case on why you should invest in Bitcoin, but is there a strong case to invest in crypto?
Should you spend your money on Ether so you can buy NFTs? Is Bitcoin Cash a better alternative to Bitcoin? Is Elon Musk right about Dogecoin and is it a gold mine waiting to explode?
First, we must understand what makes crypto different from Bitcoin. Bitcoin isn’t controlled by a government or organization. The programming is fixed and can’t be altered.
For example, there’s a maximum supply of 21 million Bitcoins. Due to its programming, this supply can’t get altered. However, this isn’t the same for any type of cryptocurrency.
At the time of this writing, there’s a maximum supply of 21 million Ether available. But as Ether is operated by a company, The Ethereum Foundation, they can edit the programming. In other words, they can increase the maximum supply.
This means that Ether can also lose its value just as your fiat currency does each day. While this hasn’t turned investors away from Ether or any other crypto, it has also created opposition to altcoins.
There are some investors who see themselves as Bitcoin Maximalists. This means that they only see value in Bitcoin and see altcoins as scams. This is in contrast to Charlie Munger, who believes all virtual currencies are scams.
Nevertheless, crypto continues to get bought by investors and speculators. Many see a future where we’ll have competing currencies so they don’t have an aversion to altcoins.
4. Why Bother At All?
For most of us, all virtual currencies seem so odd. As a result, we wonder whether we should invest in either at all.
Let’s make our case as to why you should consider diversifying outside of the fiat system.
Whenever there’s a financial crisis such as hyperinflation, we look to other stores of value to protect our wealth. This is when we realize that our property is of value. Or that our arable land is valuable.
This is also when investors hoard precious metals such as gold and silver. These are difficult to mine and as a result, maintain their value more than any fiat currency.
But the problem with gold and silver is that they aren’t easy to transport. You’re also a lot more dependent on others to buy precious metals. What do you do when your local coin shop closes? What happens if an online retailer can’t ship to your location?
This is why virtual currencies have become popular – it’s always easier to buy something online. These virtual currencies get delivered to your virtual wallet within a few minutes. Many investors are choosing to buy cryptocurrencies to protect against a possible future financial crisis.
This is something to consider if you decide to invest in virtual currencies. Whether you want to buy Bitcoin or a crypto investment, you want to consider if it’ll protect your wealth.
5. CBDCs Around The Corner
Talks about virtual currencies have increased tenfold. Part of the reason is due to the talk of CBDCs that has begun. The public is becoming more aware of the threat of CBDCs.
As such, one can only expect more conversations surrounding virtual currencies.
CBDC stands for Central Bank Digital Currency. This is a digital version of a fiat currency. Many countries around the world are considering replacing their current paper money with CBDCs.
So, why is this an issue? It’s because CBDCs are a form of programmable money.
This means that they can have an expiration date. If you don’t spend your money you’ll lose it. This means that you won’t be able to save your money for a rainy day. You can’t save your money to pass on to your heirs.
For many, it seems inevitable that all money will become digital. If this is our future, do we want a digital currency controlled by governments?
Do we want a digital currency controlled by no one? Or do we trust private companies to issue us varying digital currencies?
A lot of investors feel that Bitcoin is the only alternative to the threat of CBDCs. It’s a digital currency that has a fixed supply so it can’t lose its value. It’s not controlled by a government but it’s also not controlled by a company.
While altcoins are controlled by a company, these companies can always get controlled or manipulated by governments. These are frightening prospects but one you must consider when determining your investment strategy.
Best Practices
Before you start your Bitcoin or crypto investments, make sure you follow these best practices.
You must always consult your financial advisor before making any investments. The market is volatile and all virtual currencies have lost their fiat value at some point.
It’s best not to always depend on exchanges to buy, sell, and hold virtual currencies. These exchanges operate the way a bank does. They own your virtual currencies and only let you borrow them at their discretion.
While some investors believe we’ll be on a Bitcoin standard in the future, we’re still dependent on fiat at present. In most cases, you still want to hold onto some fiat for now.
Some Bitcoin and crypto investors dismiss other types of investments altogether. But to be on the safe side, you should still consider owning precious metals and other valuables.
You should only invest an amount you’re willing to lose. If you buy $1000 worth of Bitcoin, expect to never recover this amount.
You don’t have to learn the technical aspect of virtual currencies to invest in them. However, you must learn how hardware wallets and paper wallets work. This is the most secure way to hold onto your virtual currencies.
However, they’re not the most convenient so you must take your time to learn how they work. One thing you’ll learn about investing in Bitcoin, in particular, is that you must place freedom over convenience.
As you accumulate more virtual currencies, you’ll have to work to protect them.
Research options for cold storage and make sure you’re discreet about your earnings. However, you must always follow your locale’s laws regarding paying taxes on virtual currencies.
Is Crypto A Good Investment? Now You Know
Now you know the answer to “is crypto a good investment?” and you can choose how you want to jump into this exciting venture.
Crypto continues to rise in popularity and it’s an investment you want to strongly consider.
It’s important to understand the difference between Bitcoin and crypto. Understanding this difference will guide you in your investment decisions.
Make sure you always consult your financial advisor first. Never invest what you’re unwilling to lose. Follow our best practices for the best results!
If you need even more investment tips, there’s a wealth of articles waiting for you on our website!