Are Cryptocurrencies Really Profitable Investments? Let’s Evaluate!

Let's see how cryptocurrencies will perform in the long run.

Over the past decade, cryptocurrencies have produced many millionaires or considerably rich individuals. But that came with a gamble on their part to lose all the money invested. Is this thought causing a conflict within you? Are you considering if cryptocurrencies are good investment options or not? Let's evaluate.

Cryptocurrencies are good investments if you want to get direct exposure to the demand for digital currencies, but a safer option is to buy shares of those companies that deal with cryptocurrencies. Cryptocurrency mining stocks are also an option you can consider.

There are a lot of factors to play a role in this discussion. Firstly, cryptocurrency is a relatively new market that is subjected to massive volatility. So there is no guarantee of overnight success or profits immediately after investing. Secondly, cryptocurrency exchanges are vulnerable to cyber-attacks and criminal activities. These security breaches have also costed a fortune to many crypto investors. So, consider if you can afford to take that risk.

Cryptocurrency R

Storing cryptocurrencies securely is more difficult than buying cryptocurrencies. Crypto exchanges like Coinbase make buying cryptocurrencies easy but to store them, investors need crypto wallets. Crypto storage or crypto wallets come with their challenges like the possibility of losing your private key, without which you cannot make crypto transactions or access your assets. There's also no surety that the crypto project (company) you invest in will succeed. There are so many blockchain projects in the industry right now that there is heavy competition. Another peril that comes with crypto investment is the government's feud with the crypto industry.

Despite these challenges, the cryptocurrency market and the blockchain industry is growing every day. Some countries are allowing their financial institutions to make the necessary amendments to cater to the client's crypto needs. Professionals, individual crypto investors are also receiving tools to secure their crypto assets. Multidollar companies are also investing in cryptocurrencies, expecting a future boom. Tesla, for example, purchased US$1.5 billion worth of Bitcoin in early 2021.

Popular cryptocurrencies as long-term Investments

Two cryptocurrencies that are most talked about are Bitcoin and Ethereum. First and second in the cryptocurrency market respectively (according to the market caps), let us evaluate how these two digital coins will fare in the future.

Bitcoin benefits from the network effect, people want to own Bitcoins because Bitcoin is owned by many people. It is currently known as "digital gold" and it was also responsible to make a lot of people wealthy. Because the supply is fixed, experts believe that Bitcoin's value increases slowly. Investors who believe in Bitcoin supremacy state that Bitcoin will eventually become the world's first truly global currency.

Ether is the coin that is native to the Ethereum platform, the first of its kind to support smart contracts that boosted the DeFi sector. While Bitcoin is digital gold, Ethereum is digital silver. There are several applications built on Ethereum's platform which create many opportunities for Etherum to benefit from the network effect and create long-term value. The Ethereum network collects Ether from users in return for executing smart contracts. With the Ethereum platform increasingly being used worldwide in the banking, real estate sector, and to create other cryptocurrencies, Ether token increases in utility and value. Some say Ether has a better future in the long run than Bitcoin on the basis of utility.

The Final Verdict

If you have diversified your money into stocks and bonds, you can invest some in cryptocurrencies and expect only long-term results. If you believe that cryptocurrency usage will increase with time and Bitcoins and altcoins will be used for their actual purpose of becoming a legit mode of payment, then investing in cryptocurrencies with utility makes sense. If buying cryptocurrencies feels risky to you, invest in stocks that support cryptocurrencies and take the plunge.