After dealing with several financial crises in recent years, investors have realized they need to add alternative investments to their portfolios to reduce the risks associated with their own commodities. The most popular alternative investment at the moment is crypto, which allows investors to make profits from joining an innovative sector.
Alternative investments have gained more traction, and investors have begun to add many digital currencies, like Bitcoin and Ethereum, to their portfolios. Reports reveal that Bitcoin is among investors’ most considered choices, especially when they first venture into this new space. Also, research shows that 82% of millionaires who enter crypto start by learning how to buy Bitcoin online and then trading it. Bitcoin is the largest crypto by market cap that operates without involving a third party. Bitcoin is still one of the safest options investors can opt for, even though the digital coins have undergone some massive changes and price fluctuations.
But what are the reasons why people continue to invest in Bitcoin, even though it is a volatile digital currency?
Bitcoin Is A Scarce Asset
Bitcoin is a scarce digital currency with a finite supply of 21 million coins. Because of this attribute, crypto enthusiasts have named Bitcoin the digital gold, making investors opt for these virtual coins to protect their finances in challenging times. Scarce assets tend to have a bigger value, as the demand is higher than the supply. The history and evolution of Bitcoin can prove this fact, as its price has grown tremendously in recent years. And even though Bitcoin has experienced many price fluctuations, it is still the biggest digital currency in the crypto sector.
It Is Volatile
Although it might seem strange, Bitcoin’s volatility is one of the features that makes investors want to add it to their portfolios. The prices of virtual coins usually fluctuate a lot in a short time, creating the potential for huge returns. Those who know how to read the charts correctly and understand how to identify the patterns can have increased profits from the volatility of Bitcoin. Still, its volatility comes with the risk that the price might drop suddenly. Therefore, spending only the amount of money you are comfortable losing is advisable.
It Is Decentralized
Cryptocurrencies are built on blockchain technologies, meaning they are decentralized assets. Bitcoin’s decentralization is one factor that makes investors adopt this attractive digital coin, as it isn’t subjected to the government’s control or regulations or the traditional system’s movement. Investors are more careful on this aspect when they opt for a digital asset, as they don’t want authorities to impact their portfolio’s evolution. And luckily, digital assets make it impossible for third parties, like the government or banks, to control transactions.
It Can Be Exchanged For Cash
Some alternative assets are illiquid, but that is not the case with Bitcoin, as digital coins can be exchanged for cash if investors want this to happen. Even though crypto is made on the blockchain, it can still be traded for cash or other assets with the help of exchange platforms. Furthermore, people can use Bitcoin to buy services and products.
It Is Adopted By Institutional Investors
Over the years, many financial institutions and major corporations have shown interest in Cryptocurrencies, including Bitcoin, which lead to their credibility. Bitcoin is the favorite digital asset investors can opt for, and many countries have shown interest in it. For example, El Salvador made Bitcoin a legal tender in 2022. Also, plenty of banks worldwide have expanded their services and included blockchain technology in their processes to benefit from the innovative fintech.
Is Bitcoin A Good Alternative Asset?
Alternative assets are non-correlated commodities. This means they require different investing methods than bonds, stocks, cash and other similar assets and are not subjected to traditional regulations. This is why alternative investments like Bitcoin have a different direction from standard assets, as their prices move differently, they aren’t exposed to market downsides and act as hedges against inflation.
Investors usually want to invest in alternative assets like Bitcoin to balance the risks in their portfolios, as digital currencies can function as a cushion if another asset goes through a meltdown period. Bitcoin is one of the most popular digital assets investors can choose, as it remains a top choice due to its advantages. For example, Bitcoin is widely accepted and based on blockchain technology, making it a good alternative investment to add to a portfolio.
Due to its utility cases, research showed that Bitcoin provides a unique investment opportunity. Still, investors need to know the best ways to trade it correctly in order to benefit from its advantages. The ones that don’t have the best results with digital assets usually don’t know the best ways to trade Bitcoin correctly and don’t recognize the risks associated with investing in crypto. This is a vital step, as before you invest in something, you need to know how it functions to have good profits.
Bitcoin appears to be back on track from the beginning of 2023, as it regained some of its previous value and maintained a viable growing direction.
The Bottom Line
Those who want to invest in Bitcoin need to know that the market is highly volatile, so they need to be careful with the money they choose to invest in cryptos. However, Bitcoin has been recognized to offer some significant returns in the last few years, and this fact is expected to continue as Bitcoin matures.
Alternative assets are a great addition to a person’s portfolio, and now cryptocurrencies are one of the most popular alternative investments people can opt for. Some years ago, alternative investments were considered risky assets, but now, this concept has become more mainstream, and many people have begun to consider them. Still, the ones interested in Bitcoin should join the market when its price is low so that they will be able to make profits in the forthcoming bull run.
No Comments