It is possible to become rich by investing in cryptocurrency in 2021. However, you may lose all your money. Both are true. But how do you know? However, crypto-asset investments are risky but can also be extremely lucrative.

If you are looking for direct exposure to digital currency demand, cryptocurrencies can be a great investment. The safer, but potentially more lucrative, alternative to stocks of companies that have exposure to cryptocurrency is the stock market.

Let’s take a look at some of the benefits and drawbacks of investing in cryptocurrency.

Are Cryptocurrencies safe?

At least for now, cryptocurrency isn’t completely secure. However, there are other indications that cryptocurrency may be here to stay.

The risks associated with cryptocurrency

Cryptocurrency exchanges are less secure than stock exchanges and more likely to be hacked or become the targets of criminal activity. These security breaches have caused significant losses for investors who had their digital currency stolen.

When it comes to storage, cryptocurrencies are more secure than bonds or stocks. Both Bitcoin (crypto-BTC) and Ethereum can be purchased and sold on cryptocurrency exchanges such as Coinbase (NASDAQ : COIN), however many people don’t want to store their crypto assets on these exchanges because of the possibility of cyberattacks or theft.

Although it is not uncommon for cryptocurrency users to choose offline cold storage options, such as paper or physical wallets, cold storage has its own set of problems. The most important risk is that you cannot access your cryptocurrency without your private keys.

Investment in crypto projects is not a guarantee of success. There are many scam projects and cryptocurrency projects that are highly competitive. Cryptocurrency projects can only thrive in a small number.

Regulators may also enforce cryptocurrencies, particularly if they are seen as a threat rather than an innovation.

Additionally, cryptocurrency technology is at the forefront of innovation, increasing the risk for investors. It’s still in its infancy and hasn’t been thoroughly tested in real-world environments.

Adoption cryptocurrencies

While cryptos and blockchain have their inherent risks, they have also grown in popularity over the years. Investors have access to institutional-level custody services thanks to the development of necessary financial infrastructure. Individuals and professionals are gradually becoming more comfortable with cryptoassets.

Many companies are now participating directly in the cryptocurrency market by creating crypto futures markets. Square (NYSE: TSLA) and PayPal (NASDAQ; PYPL) make it easier to trade and buy cryptocurrencies via their platforms.

Square is one of many financial giants that have collectively invested hundreds of millions in Bitcoin and other digital assets. In the early 2021s, Tesla (NASDAQ TSLA), bought Bitcoin for $1.5 billion .

While there are still risks associated with cryptocurrencies, the growing adoption rate is a sign of the industry’s maturing. Because large corporations are investing in cryptocurrency, both individuals and businesses are becoming more interested in it.

While cryptocurrencies can be a good long-term investment, what about the short term?

High-level goals are often set during the launch of cryptocurrency like Bitcoin or Ethereum. These objectives will be met over time. While any cryptocurrency project cannot be guaranteed to succeed in the long-term, early investors may reap substantial rewards if they do succeed.

To be successful over the long-term, cryptocurrency projects need to gain widespread acceptance.

Long-term investing in bitcoin

Bitcoin is the most well-known cryptocurrency due to its popularity. The network effect means that more people want to buy Bitcoin because the majority of them own it. Bitcoin is considered “digital gold” by some investors, but it can also be used as a digital currency.

Bitcoin has gained value over time due to its fixed supply. This is in contrast to fiat currencies like the U.S. Dollar and the Japanese yen. The supply of Bitcoin is expected to never exceed 21,000,000 coins, as opposed to currencies that are controlled by central banks. The value of Bitcoin will rise as fiat currencies continue to decline.

Many Bitcoin enthusiasts believe that Bitcoin can be used as digital cash and will become a true global currency.

These are the most important features of Bitcoin:

• Blockchain technology, which is behind cryptocurrency like bitcoin, allows data to be securely sent in cyberspace using the payment method.
• Every bitcoin has a mining process
• 21 million bitcoins can be mined
• Because cryptocurrencies are not subject to central regulation, such as central banks or governments, they are “decentralized.”

Ethereum long-term investment

To increase portfolio exposure, investors can purchase Ethereum’s native currency, Ethereum. Ethereum is a global computing platform which supports many crypto-currencies as well as a large ecosystem of decentralized apps (dapps). Bitcoin can be considered a digital form of gold.

Ethereum is the platform that can host many cryptocurrency tokens, and dapps can be developed open-source. This gives Ethereum the chance to benefit from the network effect and create long-term, sustainable value. 

Smart contracts are possible with Ethereum. These contracts can be written in code and executed according to the terms.

With the help of Ether, smart contracts can be executed on Ethereum’s network. Smart contracts can disrupt large industries like real estate and banking as well as open new markets.

The Ether token is becoming increasingly valuable and useful due to the growing adoption of Ethereum’s platform. Investors who believe in the Ethereum platform’s potential to make money long-term by owning Ether will be able to take advantage of the long-term opportunities it offers.

Cryptocurrencies – Is it worth investing?

Because the price of Bitcoin is not always correlated with U.S. stock prices, it can help increase your portfolio’s diversification. 

As cryptocurrency usage will increase in the future, it might be worth adding some crypto to your portfolio to diversify your investment strategy. You should have an investment hypothesis for cryptocurrencies that will explain why it will last.

Although cryptocurrencies are becoming more popular, it can be dangerous to invest in them. You might consider other ways to profit from the growth of cryptocurrency. 

CME Group (NASDAQ : CME), which facilitates crypto futures trades, offers investors the opportunity to either invest in Coinbase, Square, or PayPal stocks, or in exchanges like CME Group. These investments may not offer the same upside as investing in cryptocurrency directly.