Wall Street, Bay Street, and Main Street are bullish on cryptocurrency. A growing number of financial experts suggest that investors should add crypto, be it Bitcoin or Ethereum, to their overall investment portfolio. The consensus is that investors should have around five percent of crypto in their portfolio, mainly because it is a high-risk and highly volatile asset.
According to Suze Orman, a personal finance guru, she recommends including crypto in your portfolio with money you can afford to lose. This popular advice matches what many experts have advised about cryptocurrency. Theresa Morrison, CFP at the Beckett Collective, also suggests that a 1% diversification can be a way for clients to explore the crypto market.
Is crypto in a bubble? The opinions are mixed, especially after the sharp correction this past summer. No matter what the state of the crypto market is, most experts agree it is now a permanent fixture of the global economy. If a Southern American country – El Salvador – can adopt Bitcoin as legal tender, then why can’t the local Starbucks accept crypto as payment? Better yet, why can’t an investor with a 40-year-old outlook engage in some set-it-and-forget-it investing involving Bitcoin, Ethereum, or Avalanche?
There are many benefits for investors to introduce crypto to their portfolio. Here are five reasons why you should add crypto to your portfolio in 2022:
Diversifying Your Investments
When purchasing stocks, acquiring exchange-traded funds (ETFs), and buying mutual funds, you want to do so through the purview of diversification. Diversifying your assets is imperative to succeeding in the world of finance. This strategy ensures you protect your capital until the funds are needed, whether in retirement or you want to pay for your child’s college tuition.
Whatever the case may be, cryptocurrency is a superb diversification tool. Although everyone is talking about Bitcoin and Ethereum these days, there are still plenty of reliable cryptos with potential and dependability. These options include Tether, Cardano, Litecoin, and Stellar.
Is it too early to determine if cryptocurrency is a hedge against inflation? Bitcoin has only been around for about a decade, so this is its first test against rampant price inflation.
Still, the data suggest that it has been reliable to shield your wealth only if you refrained from buying at the top! Many investment professionals have stated that a considerable number of their clients have switched from gold to Bitcoin. Similarly, they have complemented their metal holdings with crypto. While the verdict may be out, the numbers suggest that crypto could be a deflationary tool.
Various Investment Opportunities
The cryptocurrency industry continues to grow. It all started from the keyboard of an anonymous developer. Since then, the evolution has grown to the establishment of a Bitcoin ATM in your neighbourhood. Nowadays, you may find the Subway sandwich shop accepting Bitcoin as a payment method.
Crypto has attracted hundreds of billions of dollars in investment, leading to the growth of firms, technological developments, and widespread adoption. As a result, the financial markets have come up with a broad array of opportunities in crypto:
- Stocks (Coinbase, HIVE, Square)
- Exchange-traded funds (ProShares Bitcoin Strategy ETF, Grayscale Bitcoin Trust)
- Ownership of crypto (wallets and Bitcoin ATM)
Crypto is highly volatile. As such, you should give all the investment opportunities a long-term outlook rather than a fly-by-night trade. Be careful, be diligent, and be versatile with your crypto investments.
Cryptocurrency and the underlying technology, from blockchain to non-fungible tokens, are here to stay. Cardano aims to facilitate the growth of smart contracts. Dogecoin supports micropayments. Chainlink is working to improve upon decentralized finance (DeFi).
Ultimately, with the thousands of cryptos on the open market today, the top few dozen can develop to resolve some of the industry’s most common problems. There is long-term potential for supply chain management or peer-to-peer lending. In the end, cryptocurrency investing could eventually lead to generous returns.
Can Bitcoin, Ethereum, and Litecoin protect you from the storms on Wall Street and Bay Street? We discussed how crypto could behave as a hedge against inflation. But now, there is talk that crypto is a safe-haven asset that defends you from the ominous clouds on The Street. In other words, crypto can function similarly to the U.S. dollar, gold, and utility stocks.
Of course, there are some things that crypto needs to grapple with first. Nonetheless, adding crypto to your portfolio can give you peace of mind that your capital is defended from the torrential rains in the broader financial markets.
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