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Why Invest In Cryptocurrency? Is Cryptocurrency Worth Investing In?

Diversifying your portfolio with cryptocurrencies can improve your returns in the long run.

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Cryptocurrencies are no longer just the new hype topic that most people feel suspicious about. Cryptocurrencies' potential to become effective vehicles to create wealth and transform personal and corporate finance is undeniable. However, it is not as widely accepted as cash, and some people still have a sense of distrust for digital currencies. 

In this article, we explore why and how to invest in crypto safely and effectively. What are the main ways that are available for smaller and bigger investors when it comes to cryptocurrencies? The article's primary focus is on how diversifying your portfolio with cryptocurrencies can affect your returns in the long run. 

Learn about why you should invest in crypto

What Is Cryptocurrency? Here's What You Should Know

Let's first start by clarifying the definition of cryptocurrency. Cryptocurrencies are used as a store of value, but unlike regular currencies, they are registered on decentralised networks (also known as blockchains). Cryptocurrencies are stored using cryptography, and that's where the "crypto" comes from. There are a lot of advantages in cryptocurrencies, and one of the most prominent features is their decentralised nature that eliminates the need for a single controlling authority. (For comparison, fiat currencies are regulated through Central banks and governments).

When it comes to the purpose of cryptocurrency, it could be one or more of the following:

  • A store of value that works as a long-term investment 
  • An opportunity for speculation at exchanges due to its volatile nature
  • Instant cross-border remittances, which enables the underbanked
  • Governance and voting in decentralised organisations and applications
  • Encryption of property and other rights
  • Creation of unique digitised objects like NFTs

For a thorough review of all the features and benefits of cryptocurrencies, you can read the article we recently published: ​​What Is Cryptocurrency and What Can You Do With It.

In most cases, Bitcoin and cryptocurrency are used interchangeably. However, cryptocurrency is an umbrella term for all digital currencies created on blockchains. Bitcoin happens to be the very first currency that was created using blockchain and cryptography. It has been considered the North Star of the crypto market for a long time and still has a lot of influence in terms of prices. For example, if Bitcoin goes down, so do other cryptocurrencies. However, many other top cryptocurrencies currently offer a variety in the crypto space, such as Ethereum, Cardano, Solana, PolkaDot, and hundreds more. 

Some cryptocurrencies are already established in terms of their pricing, while others are highly volatile that offer both risk and potential gains for the owners of those cryptocurrencies. 

Diversifying Your Portfolio To Include Cryptocurrency

Cryptocurrencies are notorious for their volatile nature. It is undeniable that they are volatile, but so is traditional finance. How often do people gain or lose money on the stock market? Every day! However, volatility doesn't eliminate the opportunities for smart and beneficial investment opportunities. 

A diverse portfolio is the cornerstone of any self-respecting investor's strategy. Essentially, it reduces the risk of losing all your investments at once by avoiding investing everything into a single type of stock. Cryptocurrencies are becoming more mainstream as business giants such as Michael Saylor, Ricardo Pliego, and many others speak out in favour of investing in crypto. Governments started implementing regulations regarding the mining, trading, and use of crypto. Crypto is no longer some unexplored 'wild west' that only a few brave investors are willing to explore. Cryptocurrencies are now seen as an innovative and valid means of exchange and investment. This credibility and validation that cryptocurrencies have rapidly gained over the last several months show that investing in crypto has a huge potential.

Why you should consider investing in cryptocurrency
Table 1: Why you should consider investing in cryptocurrency

What Is The Benefit Of Investing In Cryptocurrency?

Higher Returns Compared to Traditional Investments

The volatility of cryptocurrencies is often seen as a negative. It sure can be! However, the fact that cryptocurrencies are volatile is the very fact that makes them a source of significant returns in a relatively short time. In comparison, in November of 2020, 1 BTC was $18,114; fast forward to the time of writing this article (November 2021), 1 BTC is at $65,244. 

Expected to Become Even Higher in the Future

In traditional investing, there is a strategy that most famous and successful investors, including Warren Buffett, use—called value investing. It means that seasoned investors can invest while the stock is priced low, but there is a promising potential regarding the company itself. So they invest, and make changes, and reap the rewards in the long run. While it does take some smart and educated moves, seeing the potential and risk to earn exponential returns is what brings in billions of dollars. 

With the way most cryptocurrencies are designed, there is a limited number of supplies for each currency. Cryptocurrencies are not fiat currencies that can be printed out, hypothetically speaking, limitless times. As basic economics teaches us, the limited supply leads to a higher valuation. This is why we are seeing a lot of value investing—investors who are seeing the value of cryptocurrencies at the very moment are thinking in the long run. 

For example, Bitcoin's total supply is 21 million BTC, and the current circulating supply is 18,869,975 BTC. As it gets closer to the total supply, we can already see the rapid growth—and it will most likely continue to hold its position among top coins. 

You Can Start Small but Still Make Exponential Gains 

There are hundreds of coins that you can choose from based on reviews and market trends. If exchanges are too daunting, there are platforms, such as Cabital, that allow smart and educated ways to buy, sell, and earn with crypto, where you earn competitive APY rates on your deposits.

Due to the increased adoption of cryptocurrencies, investment portfolios will continue to have relatively large chunks of crypto investments. However, with crypto, one doesn't have to invest hundreds of thousands to see significant returns. You can choose a reputable platform to trade or stake cryptocurrencies and test the waters. With the rapid changes in the crypto space, crypto traders are more likely to get higher rewards than traditional stocks. 

Safe Haven in Unstable Market Conditions

When the stock market is uncertain, most investors resort to gold or bonds. In recent years though, cryptocurrencies have established their reputation as an alternative investment vehicle. When a fiat currency faces instability, investors who hold most of their assets in cash will look into alternatives to avoid too much risk of losing the majority of their assets. In this sense, as a decentralised means of exchange, cryptocurrencies hold their position regardless of political or economic changes. While some view crypto assets as too risky due to being decentralised, in some cases, this very feature allows investors to manoeuvre market crashes with minimal losses.

Is It Worth Investing In Bitcoin?

The short answer is yes. The long answer is: make sure you make educated decisions, not emotional ones. It is common to see super emotional decisions among crypto enthusiasts, especially among newbies, just because someone in their circle of friends made a massive return on their BTC that they bought months ago. When one hears stories of extremely high returns, it is normal to get too excited. However, if you are serious about including BTC in your portfolio, it is wise to do some research and start small with a reputable platform instead of jumping right into it. 

If you treat investing in Bitcoin as a game, it is unlikely to help you in the long run. Treat it as you would treat traditional investments: calculated, strategic, and cold-headed moves, only.

Focusing on the long run would be a top strategy for BTC because if you invest in Bitcoin or any other top coins in the market—you are most likely to see many ups and downs. Not all ups and downs require you to take action; keeping your calm while holding on to your long term investment plan is a way to go.

How Safe Is Cryptocurrency?

The crypto market is evolving by the minute, and the fact that it is among the newest ways to invest brings many doubts to potential crypto investors. We will state it openly and bluntly—not all crypto investments have to be high risk. 

There are new ways to make returns or diversify while staying reasonably safe. 

If you are new to crypto, you can diversify your investment portfolio by storing part of your assets in stablecoins. Stablecoins are backed by gold or cash and stand for digital versions of fiat currencies, such as US Dollars. For example, USD has USDT and USDC as its stablecoin. The value of 1 USDT stablecoin remains at around US$1. Even with minor ups and downs, it quickly stabilises its value. 

In addition to stablecoins, there is a path to make rewards through a savings account in cryptocurrencies. Think of it as a savings account with your local bank, but the returns are a lot higher with cryptocurrencies.

Another advantage of crypto savings accounts is you can start with any amount to reap the benefits of investing, and the percentage of rewards remain the same. Great way to start with a smaller amount and take it from there as you figure out which digital coins are optimal for your investment goals and strategy.

Table of crypto investment options
Table 2: Table of crypto investment options

How Do I Buy Cryptocurrency?

There are several ways to purchase cryptocurrencies, including SEPA, Faster Payments, SWIFT, peer-to-peer exchanges, and third-party exchanges. 

There are nuances and advantages for each of them. 

There are trustworthy platforms, such as Cabital, that allows you to buy and sell cryptocurrencies using SEPA transfer, Faster Payments, or Plaid. The limitation here is that SEPA transfer is only available for European bank accounts, Faster Payments (FPS) is only available for GBP transfers, and Plaid is available for selected financial institutions within Europe. As SEPA, FPS and Plaid utilise bank transfers, you'll enjoy the added security provided by the banks on their networks, as these can only be initiated by authorised personnel for verified accounts. The added benefit is the processing times are around 1-2 days and by far one of the quickest methods to obtain cryptocurrencies. 

If SEPA transfer is not an option for you because you are not based in Europe, the SWIFT transfer is another method that works globally. SWIFT utilises bank transfers and is one of the safe ways to buy and sell cryptocurrencies. The limitation of this particular method would be the processing times, up to 4 business days. In addition, since the transfers are done through banks, there will be different currency exchange rates and possible fees involved.

Credit cards are another option to purchase cryptocurrencies. You can use different exchanges or platforms, enter your credit card information, and buy instantly. There are two downsides to this method. First of all, some platforms charge extremely high fees for the transaction. Secondly, credit cards are vulnerable to data breaches and can cause security risks in the long run. 

In addition, you can buy and sell crypto on peer-to-peer exchanges - however, identity theft and reversible payments are the major downsides of these types of exchanges. While the fees are low (or in some cases zero) while using this method—is it worth the risk? You decide!

Last but not least, third-party platforms for crypto exchange are also common ways people buy and sell crypto assets. The downside, in this case, is that the third-party platform fee can range from 2 – 5%, and you'll be charged in USD, which can result in increased costs depending on the exchange rate when you complete your transaction. 

For more detailed information on how to buy and sell cryptocurrencies, see one of our recent posts on Cabital Blog

Generate A Steady Stream Of Passive Income With Cryptocurrency

When someone says cryptocurrency - the first thing that comes to mind is BTC or ETH. Correct, but the variety of cons available in the crypto world ranges widely. As we mentioned earlier, if you are new to investing in crypto, it is good to start with stablecoins.

Think of it as a regular currency with the added benefit of cryptocurrency.  

In a nutshell - there are three ways to make passive income using stablecoins!

  1. Earn interest through lending your stablecoins on a reputable platform, such as Cabital. This is a good way to earn passively, without thinking about mitigating the risks on your own or meeting the stablecoin regulations in different jurisdictions. 
  2. Another way would be to lend your stablecoins for interest by yourself. In this option, since you are the one who is lending the stablecoins, you have to calculate your risks and plan accordingly. 
  3. A third way is to stake your crypto assets. Essentially, you lock up your stablecoins or other cryptocurrencies for a limited time and earn rewards on that. Interests, in this case, might be smaller, but you will certainly get a reward every time you stake. 

In conclusion, make educated decisions while you plan to take your piece of the cake in this exciting and promising market. An important point to keep in mind while generating a passive income stream with crypto assets is this: do your research and only work with platforms that are trustworthy & reputable. Finding and sticking with a trusted platform to buy, sell, and make passive income with crypto is the key for secure and profitable crypto activities. For example, at Cabital, we have a transparent process to help thousands of users double down on this exciting market. ​​

The advantages of working with Cabital include:

  1. Short-term test deposits enable everyone to make sure everything works fine without risking too much.
  2. Full legal compliance with European regulations and official registration in the EU (reg.no. 305748659) ensures smooth and trouble-free profiting.
  3. The annual yield of up to 6% on any deposited amount.
  4. SEPA, FPS and Plaid transfers to effortlessly buy and sell crypto.

Get started with Cabital today!

This article has been prepared by Cabital Fintech (LT) UAB  (the “Company”) and is general background information about some of the Company’s activities at the date of this presentation.

This article does not contain all the information that is or may be material to you and should not be considered as advice or a recommendation to you in respect of the holding, purchasing or selling of digital assets and does not take into account your particular objectives, financial situation or needs. This article has been made to you solely for information purposes. This presentation may be amended and supplemented as the Company sees fit, may not be relied upon for the purpose of entering into any transaction and should not be construed as, nor be relied on in connection with, any offer or invitation to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any digital assets, and shall not be regarded as a recommendation in relation to any such transaction whatsoever. The contents of this presentation should not be considered to be legal, tax, investment or other advice, and you  should consult with your own counsel and advisers as to all legal, tax, regulatory, financial and related matters concerning an investment in or a disposal of such digital assets and as to their suitability for you.

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The information in this article has not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the presentation and the information contained herein and no reliance should be placed on it. Information in this article (including market data and statistical information) has been obtained from various sources (including third party sources) and the Company does not guarantee the accuracy or completeness of such information.