Cryptosphere has emerged as an alternate investment market for traders and investors alike. Not only can you earn higher profits but also add some diversification to your financial portfolio. But how did the world of crypto come into existence?
The Cryptosphere was established with the introduction of Bitcoin in 2009 and has recently celebrated a decade in this industry. The entry of Cryptos in the financial world gave everyone the freedom to own their money. Before, the financial institutions, central banks informed us when, where and how we can utilize our currency. The shift from centralized to decentralized was made here.
Potential Uses of Cryptocurrency Market in Financial Portfolio
Paper Money is a limited resource or that’s what we think. For most of us, there is never enough currency to spend or cover our expenses or pay our debts. But the truth is that fiat currency is unlimited. Controlled by a central bank in most countries, national currency can be printed anytime and whenever needed. But for anything to retain its value in the market, it needs to be rare.
When countries inject more national currency into the system, its value is decreased. With each $100 dollar that gets into the market, the lesser value it holds. This is what causes inflation. Inflation refers to the decrease in the purchasing power of people caused by less value of money in the market.
Money when controlled by people, groups, government or any authority will remain a risky investment option. Even when you opt for savings and assets when the value of fiat decreases so does the value of assets. Here, cryptos offers a better alternative because they are not controlled by any government or central authority. Thus, they remain unaffected by inflation of any national or fiat currency.
No limit to its application
Cryptocurrencies have no limit where its application is concerned. From retail stores to investment options, Cryptos offer a multitude of options. Fiat has a limit to where they can be used. This is decided by the authority that controls it. Whereas Cryptocurrencies use is decided by the crypto community and the people who use or operate it.
You can buy a pen to a dress to a car with cryptos. Some brands like Burger King have even gone ahead to introduce their own crypto called whoppercoin. Software giant Microsoft lets its users renew or buy software using Bitcoins.
Hence, the application of Bitcoin and altcoin is limitless making it a more favourable option for investment.
Acts as an asset rather than a debt
Today, most adults are under pressure to pay off their loans. Car Loans, Home Loans, Credit Card payments, all are part of the debt that most youngsters have taken and are struggling to pay back in the next 10 years of their lives. This is because Economies today are designed on and for debt. Debt is like a hook that once you get caught, you will struggle the rest of your life to get free.
Opposite for debt can be savings or assets. Assets is used to signify something of value that you own and can be mortgaged, sold or exchanged for something else of value. Taking debt is inevitable but it should be avoided as and when possible. Careful consideration of its ramifications should be done. Rather, seeking to own assets that maintain their value and can help in times of need are what should be a part of our financial portfolio.
The best way to get a loan is to get one backed by assets. This minimizes the interest rate and fees. For lenders too, asset-backed loans hold a low-risk factor. In terms of Cryptocurrencies, Stable Coins offer a perfect alternative to the highly volatile crypto market. Digix Gold and Gold-backed cryptocurrencies are another option for people who want to own assets than go in debts.
Provides true diversification
Diversification for most investors refers to not putting all their money in one basket. They consider diversifying as investing in different stock options or multiple companies. But consider if the whole national economy suffers a recession? Do you think the different stocks, industries or risk options could prevent your investment from going down?
There are rarely investors who risk getting involved in different currencies. Even if you do, almost all national or fiat currency has a daily up and down movement. For true diversification, it is important to keep your money unrelated. This means that investing your money in something that is not dependent or related to something else.
When you compare fiat currency investment to Bitcoin, Bitcoin is your independent currency with no correlation to anything else. It is decentralized with no restriction from government or other centralized authority.
Financial Market has been a great investment option for investors until Cryptocurrencies were introduced. The crypto market may have a high volatility factor but have better potential to offer higher returns and less risks. For a true diversified financial portfolio, start by investing in a few crypto coins and see the difference.
To learn more about Bitcoin and altcoins, refer to our blog.