Over the last decade, the value of coins such as Bitcoin and Ethereum, among others, has skyrocketed. While the rates of return may not approach the boom seen in recent years, many investors remain optimistic about cryptocurrency’s expanding role.
The most popular motive for people to invest in cryptocurrencies is to speculate on the price in the belief that the asset will be worth more in future. You are probably thinking if that is something we already do before investing in any asset class, let us delve further…
Hedge Against Inflation
Consider Bitcoin, also known as digital gold that has long been used as an inflation hedge due to its inherent scarcity. Bitcoin mining will cease if the number of coins in circulation exceeds the hard cap of 21 million.
However, not all cryptocurrencies are equally treated…While bitcoin’s algorithm incorporates scarcity, other coins are inflationary, which means there will never be a maximum amount generated.
Dogecoin, for example, fits into this category: Every minute, 10,000 new doge tokens enter circulation and will do so in perpetuity (unless developers step in to cap the supply.)
A Store Of Value
While volatile cryptos like bitcoin are not the ideal holders of stable value, there is a sort of coin built specifically for that purpose are stablecoins.
Stablecoins are crypto assets linked to fiat cash or other assets. The recent collapse of Terra the equation, however, has demonstrated that algorithmic stable coins are not secure.
Circulation Control
Cryptocurrencies touted as a possible alternative to the current monetary system, in which governments and big financial interests control the amount of money in circulation.
Despite crypto’s reputation as the Wild, Wild West, most people realize blockchain’s promise as a new technology infrastructure with real-world value, just as laptops, iPhones, and cloud storage do.
Blockchain Technology At The Helm
The blockchain technology is the ‘holy grail’ of the cryptocurrency sector, a ground-breaking technology that ensures every transaction is recorded in a decentralized digital public ledger.
It is decentralized since no central authority, central bank, or government administers the system. The blockchain prevents cryptocurrency users from cheating as it prevents double spending; users cannot spend more cryptocurrency than they have.
Think about a system, where all transactions are recorded permanently. Like physical money, you can only spend your cryptocurrency once.
Independent Of Control
The cryptocurrency system promoted as an unbiased democratic currency system free of the influence of a small group of strong actors: the government and the wealthy.
El Salvador and the Central African Republic accept them as legal tender. Cryptocurrencies enable people to send remittances, presuming that recipients can spend their ‘crypto-dollars’ directly or convert them to hard currency or their home currency.
On the other hand, a system that runs without control is inherently unstable and will allow dirty money to circulate, weakening anti-money laundering efforts.
Why Are Companies Accepting Cryptocurrency?
Companies who are looking at cryptocurrencies to increase their customer base and reduce costs. They believe that cryptocurrency is the future of payments. Major companies are starting to accept cryptocurrency as a form of payment. Some of these companies include Microsoft, Starbucks and Amazon.
Conclusion: Many cryptocurrencies provide considerable benefit to many people who value rapid and safe transactions, it is difficult to argue that there’s no gain in using or investing in crypto.
When the benefits of diversification and the possibility to hedge against inflation are considered, the advantages of adding crypto or crypto stocks to your portfolio begin to pile up.
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