Why Are Cryptocurrencies Becoming an Attractive Opportunity for Investment?
Investing in cryptocurrencies has become one of the most talked-about and newsworthy topics in recent years — ranging from the highs of astonishing stories about overnight bitcoin millionaires to the lows of worrying articles about cryptocurrency-related frauds and scams. For those who are considering investing but not sure what the attractions maybe, what are the reasons to get started now? Below, we will outline some factors to keep in mind which might explain why cryptocurrency is being seen as a more attractive opportunity for investment.
Superior Returns
Interest rates in the US and Europe are historically low and bond yields in developed markets have been trending down for the last 20 years. While cryptocurrencies are still seen as relatively new and higher-risk (the original Bitcoin white paper was only published 11 years ago), investors taking a chance on a portfolio of the major cryptocurrencies can still expect to see pretty healthy returns over time. According to cryptocurrency analyst Ryan Strauss, Managing Director of Bitcoin Consulting Group, of all currencies worldwide, Bitcoin yielded greater returns than any for 5 out of the previous 6 years (with the exception of 2014):
- 2011: Bitcoin +1500%
- 2012: Bitcoin +299%
- 2013: Bitcoin +5400%
- 2014: USD +13%
- 2015: Bitcoin +37%
- 2016: Bitcoin +130%
As an alternative investment, cryptocurrency is high risk but also offers high returns so it can present a great way to diversify, especially for investors willing to hold onto the investment for a few years, and even though it represents just a small percentage of an overall investment portfolio. Adding just 1% of bitcoin to a traditional multi-asset portfolio of global equities and global treasuries, produced a 2.2% higher annual return, according to research published in Bloomberg.
The Internet of Value will Outperform the Internet of Information
Over the past decade, large technology companies that have harnessed the benefits of the ‘internet of information’ — in other words, the likes of Facebook, Amazon, Google, and Microsoft — have become some of the most valuable companies in the world. More traditional investors who missed out on that opportunity in favor of seemingly safer investments like government bonds or stocks in traditional public companies not including the big tech FAGA corporations (Facebook, Amazon, Google, Apple, etc) now realize that their caution means they have significantly underperformed the market.
As we edge into the next decade, the same will be true of exposure to cryptocurrencies and other forms of digital assets. The ability to own a portfolio of cryptocurrencies or invest in ‘security tokens’ which represent a digital stake in a property or a piece of art, for example, will become more commonplace. Over time, as we shift more financial activities onto distributed ledgers, most forms of trade and commerce will increasingly be conducted this way. Investors in cryptocurrencies tend to get involved in their investments not only due to the opportunity of higher returns but also because they have formed a longer-term investment thesis that expects that new decentralized forms of corporate governance and peer-to-peer value exchange will represent the future of business and global trade.
Distributed Networks and Decentralised Worlds
The cryptocurrency and blockchain industries are often referred to as transformational and are regularly compared to the early days of the Internet in the 1990s. Just as the internet ultimately evolved from the domain of tech geeks and visionaries to have a far-reaching impact on us all in virtually every area of our lives, supporters of cryptocurrencies and blockchain-based start-ups are taking an educated bet that these technologies will ultimately have the same outcome and impact on society. Investors who share the view that in the future networks will be distributed and that we will see great efficiency gains and new innovations as a result of distributed ledger technologies would do well to get involved in cryptocurrency investing early on.
Volatility is likely to lessen
Custody solutions for cryptocurrencies are gradually maturing. As this happens, financial institutions, as well as a greater number of retail investors, are likely to add cryptocurrencies and crypto-assets to their portfolios. The likelihood is that the volatility and risks of holding cryptocurrencies will lessen over the next few years. And, for now, there is still the potential for substantial gains for those willing to become early adopters and take a balanced view of their investments over time rather than just looking for a rapid exit.
Regulated Exchanges are becoming more widespread and trusted
Cryptocurrency exchanges are allowing us to buy and then to securely and transparently exchange digital assets with anyone in the world for the first time in history. They are also making it easier for new users to be on-boarded and regulators are requiring due diligence including Know Your Customer (KYC) and Anti-Money Laundering (AML) checks which provide a greater degree of confidence and some basic consumer protection for new users.
Cryptocurrency investing is still in its infancy — and can seem intimidating for many people — but the time is ripe to become educated and do some due diligence on this phenomenon which is rapidly becoming a popular alternative investment all around the world.
CoinMENA, incorporated in Bahrain, is one of the MENA region’s leading digital assets and blockchain companies, providing a safe and easy way to buy and sell digital assets. For more information, visit CoinMENA.com
