While the coronavirus outbreak continues to uproot traditional stocks and assets, cryptocurrencies have only proven to be resilient during these unpredictable times.
As the pandemic continues to worsen, and businesses are forced to follow stricter regulations, how does the cryptocurrency market continue to thrive despite social, political, and financial unrest?
- Cryptocurrencies Prove Resilience from the Global Pandemic
Although Bitcoin value decreased along with the sudden dip in the global economy in March, Bitcoin was able to bounce back faster than any other global asset.
Bitcoin value significantly increased by 40% since the height of the pandemic and has consequently gone up by 24% since the beginning of the year.
This digital asset was able to find a natural bottom. It was able to recover and normalize price movement in the following weeks– proving to be a highly resilient and self-correcting market. This encouraged investors to start converting their traditional assets into digital assets.
The cryptocurrency monetary system allows it to be immune to economic fluctuations.
This asset continues to make transactions directly between buyers and sellers only, making it impossible for assets to be controlled by third party organizations and the government. This makes cryptocurrencies highly resilient from social and economic instability and unrest.
Additionally, the logistical constraints and lockdowns concerning the coronavirus pandemic may even be favorable to cryptocurrencies, as transactions are completed online. Investors who have previously chosen to make physical transactions via cash find trading bitcoins online the safer and more convenient option.
- No Barriers For Entry
For investors having difficulty entering the market, digital assets are a viable investment option as it involves minimal restrictions and requirements.
While several brokers and assets would require a minimum capital outlay, cryptocurrency investments allow small trades–sometimes as low as a single share.
Unlike stock trading, no certificates and licenses are required. Opening and maintaining an account is easy and user-friendly– simple visit one of the many available cryptocurrency platforms online.
- Trading is Simple and Consumer-Friendly
Trading cryptocurrencies is extremely simple and consumer-friendly. Direct and personal transactions take place between the buyer and the seller.
There’s no rocket science involved– buy or sell a bitcoin, or choose to save it up in your waller.
Transactions and liquidation are also instant, unlike stock trading. This is an essential characteristic for investors who need to make time-sensitive decisions of entering and exiting the market.
Several trading platforms and online brokerages have made it extremely easy for consumers to make transactions through applications and websites. These were specially designed with the consumer in mind, allowing for multiple types of digital assets, currencies, and deposit methods.
The existence of these platforms also allows cryptocurrencies to be a highly liquid market. Cryptocurrencies can instantly be traded into cash, making it a stable option for either short-term or long-term individual trade.
- Wall Street Is Going Crypto
Wall street legends claim that cryptocurrencies have provided a significant hedge against the predicted inflation caused by the coronavirus pandemic. Household names under the investment industry claim to have converted at least a quarter of their wealth on Bitcoin and cryptocurrency investments.
According to the Grayscale Investments Q1 2020 Earnings report, 88% of all Bitcoin investments in the past quarter were made by institutional investors.
JPMorgan, the largest bank in the U.S., has made headlines after the company recognized the considerable long-term potential of the cryptocurrency market. The bank now processes cryptocurrency transactions and has offered banking services to leading crypto exchange platforms, Coinbase and Gemini.
Paypal also made headlines as the company launched a new service that enabled users to buy, sell, and store cryptocurrency directly from Paypal accounts. Cryptocurrencies may now be used to pay for purchases at over 28 million stores worldwide.
Financial analysts continue to vouch for the potential of cryptocurrencies in the global market. This is further strengthened by the 2020 record inflows of Grayscale’s cryptocurrency funds, with capital inflows totaling $503.7 million.
A Grayscale Bitcoin Trust of $388.9 million has also made it more attractive for institutional investors, allowing the purchase of bitcoins to be as reliable as any other over-the-counter asset.
- Feasible Long-term Investment
Cryptocurrencies (particularly Bitcoin) have proven to beat other assets, including gold, stocks, and oil, in year-to-date returns, proving to be an investment that is worth giving considerable notice.
Cryptocurrencies are still considered a highly volatile market, so short-term investors of 5 years or less should look for a different option. This means that price movement is rapidly changing, and conditions are highly likely to fluctuate in a short amount of time.
On the other hand, asset value can also dramatically improve and bring considerable profit.
It is essential to remember never to invest more than you can lose—only trade cryptocurrencies on safe and reliable trading platforms that provide security and insurance. A sudden drop in price movement can only be tolerated by long-term investors with considerable savings.
How to Build a Long-term Cryptocurrency Portfolio
Before building your portfolio, remember to carefully analyze the market and make a careful decision on a potentially rewarding investment option.
- Choose a Cryptocurrency
While core cryptocurrencies such as Bitcoin continue to make a mark, many other alternative options are worth taking into consideration.
Look for a digital asset that suits your particular financial needs and goals. Make sure to carefully look into its reputation and social networks.
2. Analyze and research market trends and approach
Before going into any investment, remember to look into the brand’s vision, approach, and development.
3. Check market capitalization
The higher the market cap, the lower the risk for investors.
4. Portfolio Diversification
Successful investments are possible by carefully making decisions on different assets that can benefit your portfolio in the long run. For long-term investors who can handle the financial risk of cryptocurrency volatility, incorporating several crypto assets into your portfolio will ensure that you have your bases covered.
Remember, though, to never bite more than you can chew.
5. Use a Cryptocurrency Portfolio Tracker
Numerous websites and applications have now made it extremely easy for consumers to get real-time and insightful information on their assets.
These platforms were specifically designed to be comprehensive and consumer-friendly tools for the general public, providing multiple options in terms of currency and deposit methods. Aside from easy application and account maintenance, liquidation is also instantaneous.
While investment in cryptocurrencies may daunting due to the risk of volatility, long-term investors who can handle the financial risk should seriously consider incorporating digital assets into their portfolios.
Cryptocurrencies are a good investment for investors willing to take a chance on the inevitable emergence and potential of financial technology.