In 2020, more people than ever are investing in cryptocurrencies. Why is this? There are many reasons people are choosing to invest in this new form of digital currency. Some reasons have to do with the currency itself, other reasons are a result of the global financial climate. Still other reasons are simply due to the maturing of the cryptocurrency investing industry. Here are the 5 top reasons more and more people are investing in cryptocurrencies today.
1. The Potential for Huge Profits
It is a simple fact that people are getting rich from investing in cryptocurrencies. When Bitcoin investing first started to take off a decade ago, each Bitcoin was worth about $0.30. In the next few years, that number jumped to $13 then to $700 and eventually to an all-time high of just under $20,000 in 2017. Right now, in 2020, Bitcoin is generally trading between $5,000 and $10,000. Even those who got in later and paid a few thousand dollars per Bitcoin have turned an incredible profit in the last few years. This is very enticing for many investors.
Do keep in mind that cryptocurrency markets are still very volatile and quite risky. For every stretch where cryptocurrencies go up and up and up, there is generally a stretch where it does the same in the opposite direction. The Bitcoin numbers above illustrate this quite well. If an investor got in during December of 2017 when Bitcoin hit its high, how were they doing just one year later? In December 2018, Bitcoin was trading at around $3,100. This is worth keeping in mind before going all-in on crypto.
2. Other Cryptocurrencies Exist
When Bitcoin was the only horse in the race, only a certain number of coins were available to buy and sell and it could only be done at one price. This severely limited how many people could invest, either because of pure supply and demand or because of the prohibitive cost of the asset. That continues to dramatically change as more cryptocurrencies are created. In 2020, around 5,000 cryptocurrencies were on the market and many more are currently being developed.
The sheer number of cryptocurrencies allows many more people to be involved in the investing process. Investors are now able to find cryptocurrencies they are interested in at a price that keeps them comfortable. Like any investment, they will not all be winners but many have great potential as a good investment vehicle. Top cryptocurrencies such as Ethereum, Tether, Ripple, Litecoin, and Tron among others are all seen as good investments by many in 2020.
3. The Increasing Popularity of Crypto Day Trading
Day trading, the practice of buying an asset and selling it a short time later within the same day, lends itself incredibly well to cryptocurrencies. The idea behind the practice is to make small, quick profits throughout a session. Since the cryptocurrency markets are so volatile and move so much on a given day, they are great vehicles for day traders. Even many stock traders who engage in this practice are migrating into cryptocurrencies.
Of course, as mentioned above, there is also a good amount of risk in any day trading and especially in cryptocurrency trading. You can get wiped out as quickly as you can turn a profit. That said, profits can be much larger in a single quick trade while day trading cryptocurrencies than they usually are in stocks or other assets. If you do your research and implement the right strategies, crypto daytrading can be very lucrative. If you are interested in learning more, Cove Markets has a thorough guide to strategies for cryptocurrency investing.
4. The Stock Market Stinks
This is a more recent development and is closely tied to the coronavirus pandemic. The stock market can be a depressing and dangerous place right now. After years of a general upward climb since the 2008 market crash, COVID-19 fears have created, at best, a very volatile and unpredictable market and possibly at worst, a sinking ship. These issues have wiped out the massive gains the market made in the last few years and no one really knows where it is going next.
In contrast to the stock market, which is scaring many investors away, the crypto trading markets have seen an uptick in volume since the pandemic started. The cryptomarket is as volatile as it has always been, but investors may be seeing it as a desirable alternative to stocks and bonds. Even if investors are not going all-in and switching entirely to cryptocurrency, many are seeing it as a very valuable asset to add to their portfolios.
5. Cryptocurrency May Be the Future
As the entire world economy struggles and central banks try all sorts of measures to combat this downturn, many people are beginning to believe now more than ever that there is long-term value in a decentralized digital currency. The global economic downturn that has happened as a result of COVID-19 illustrates just how interconnected the world’s economy is. This fact, coupled with the opinion of some that central banks are engaging in too much fiat currency manipulation, is making investors more bullish on the future of cryptocurrency.
Even if no major economic revolution does away with fiat currency and creates a switch entirely to cryptocurrency. Most signs point to the fact that cryptocurrency will be a very viable form of currency in the future and is something that more companies and investors will adopt and accept in one form or another. The possibilities of more widespread and mainstream use of cryptocurrencies in the future are very attractive to investors.
These are just a few of the biggest reasons more people are investing in cryptocurrencies. When you start to look into this new investment vehicle, you will find others as well. No matter what the reason, the fact is that more people are investing. Now more than ever, it looks like cryptocurrency is here to stay.