Why Invest in Cryptocurrency?

Doesn't it seem like everyone from your neighbor, your co-worker, and even your local teenager is jumping on the cryptocurrency bandwagon? Where HAVEN'T you heard about cryptocurrency?

You've probably heard all the buzzing news about kids making thousands on NFTs and people suddenly becoming millionaires because the cryptocurrency, Dogecoin, just skyrocketed. It's honestly a wild time we're in right now, and there's a lot of investors who jump on the bandwagon and invest in cryptocurrency without understanding what it really is and why it's bound to change the world. The crazy thing is some of these investors who barely know what cryptocurrency is other than the word Bitcoin, are becoming rich off the fact that they were early investors. Now don't get me wrong. I'm not saying you've missed your opportunity, in fact in my opinion it's still a perfect time to invest.

You Are Still Early!

That's right. You're actually still early in this cryptocurrency movement.  All the hype, lack of understanding, and growth of cryptocurrency is comparable to the adoption of the internet. Cryptocurrency is just like 90's/2000's internet boom, where people invested and earned returns without truly understanding what potential the internet held.

The exciting thing you can see from this chart is that that we're still in the early stages of adopting cryptocurrency. With every invention, such as the internet or even the microwave, adoption takes a while. There's a lot of factors including re-education, that needs to happen before majority of the world adopts. But the great news is cryptocurrency is still an infant; it's still ready for huge growth.

Do you think feel like you're late on boarding the crypto train, or have the regret of missing out holding you back? I always try to relate these posts back to me because like you, I'm just YourAverageInvestor. So, I'd like to share something about me that might make you feel better about "missing out".

I gave a presentation to my company back in 2016, about how blockchain and cryptocurrency technology would disrupt the banking industry and the world. I was gung ho and over the moon about the actual application it had for changing the way we thought about finance. But, the sad thing is I didn't own any cryptocurrency until 2021. Can you believe that? If I had invested $100 in Bitcoin back when I gave my speech, I would roughly have $10,000 today. That's a 100x in my investment. Talk about the craziest feeling of regret and being late to the game! So trust me, I've also missed out in a very big way, but it's really not too late. Like me you can start adding crypto to your portfolio and still be considered one of the earlier people to adopt.

So if you're wondering if you're already late to the cryptocurrency movement, the answer is no! Right now, is the perfect time to get a basic understanding of cryptocurrency, and learn about the abundant opportunities within it. Like the internet, cryptocurrency will enable products, platforms, and interactions that have never been seen before.

Adoption is Growing

In order to believe that it's early, you first have to believe that cryptocurrency adoption will actually grow. So let me share a few facts thats might convince you of this. Cryptocurrency has already seen a lot of growth, and growth that honestly is hard to ignore.

Global adoption of cryptocurrency in 2021 grew 881% compared to the previous year, and by value cryptocurrency is the world's 5th most circulated currency at over 1 trillion dollars. In 2021, cryptocurrency saw a huge boom in not just established markets, but also emerging markets. Nigeria ranked as the most active and saw 32% of the population using cryptocurrency and Vietnam was close behind by at 21%. El Salvador also became the first country to make cryptocurrency legal tender, meaning the government will give sovereign backing to cryptocurrency. Other governments are also expected to follow suit very soon as well.

The exciting thing is there are also a large number of projects and dApps (decentralized applications) that are gaining traction in bringing cryptocurrency to the masses. You can now buy gift cards, flights, and food with cryptocurrency just like fiat money. Investment apps like Robinhood, Webull, and SoFi which are traditionally investing platforms for stocks are also now expanding to cryptocurrency, making it even easier for someone to get access to investing in crypto.  

Diversification

Don't put all your eggs in one basket

What can investing in cryptocurrency do for you and your portfolio? Well, my investment philosophy has always been about diversification. My investment portfolio ranges from real estate, stocks, retirement accounts to cryptocurrency. You might know from my other posts that I'm a big proponent of the simple ETF as form of investing, but I don't have all my financial wealth tied to just ETF's. Diversifying is a way to make sure that you reap some benefits of all investment vehicles and stay relatively in a safe position in case one of those markets crash. Cryptocurrency has already become accepted as a form of diversifying ones portfolio and a way to hedge against inflation. The investment options within cryptocurrency makes sure that there's a broad range of diversifying options for any investor.

The cryptocurrency market is sometimes volatile so, like stocks, I don't have 100% of my investments in crypto. Similarly, within cryptocurrency there are less risky assets as well as higher risk assets with greater rewards. You can purchase stable coins which, like the name suggests, are less risky coins with values tied to fiat currency. The UST coin for example tracks the US dollar in value, while giving you a 20% APY if you hold it on platforms like Anchor. On the other hand, you could go more risky and buy into Dogecoin or Shiba Inu and cross your fingers and hope it Elon tweets something that makes it shoot to the moon.

All I'm saying is that cryptocurrency as a whole, is more risky than stocks, but it has its own forms of more risky and less risky assets for you to match your risk tolerance to. This makes it a very viable option for any investor to look into and diversify their portfolio.

What to Expect from Crypto

I think it's really important to level set expectations. Like I mentioned previously, adoption of cryptocurrencies is still in the very early stages of extreme growth. It'd then be fair to note that like the internet boom, cryptocurrency has suffered its own crashes notably in 2018. It is definitely a more volatile market than other investments, so I cannot promise that you will be the next crypto millionaire. But, I do believe that like the internet companies, there will be winners and losers and in the longer term the overall movement will stay strong.

I don't want you to get into cryptocurrency investing thinking that it will be an easy way to reach the riches you desire, because there are a lot of people who go in with that mindset. Cryptocurrency investing requires a lot of studying and knowledge on the technology, applications, teams, and plans behind each coin. A lot of people who are throwing their money in at the first buzzword coin that they hear from the news may win big, but they may also lose big. Just like my motto for YourAverageInvestor, I just want to make it clear that I want you to invest with intelligence rather than investing in the trend.

The last thing I would want to do is to lead you into dumping all your financial wealth into crypto when you yourself are not fully comfortable. We all have our own risk tolerance, and I advise you to stick by whatever tolerance that may be. Just because I and maybe people around you are proponents of crypto, don't feel pressured to invest more than you are comfortable with. You're not "missing out" if you didn't intend to participate.

Join Our Journey

I'm just like you, I'm just YourAverageInvestor. The world of investing is massive and all of us, myself included, are on a journey to increase our financial literacy, achieve our financial goals, and master the art of investing. That's why I want you to join OUR journey.

I really do think cryptocurrency is the future and even with its volatility, I implore you to invest even $1 into crypto. Cryptocurrency is a big opportunity so just make sure when you do participate; make sure whatever you invest is in line with whatever your risk tolerance may be.

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