There are few investments as divisive as cryptocurrency. While some people are convinced it's going to change the world, others strongly believe it's going to crash and burn.
Even the experts can't agree on whether it's a good investment or not. Some celebrity billionaires like Elon Musk and Mark Cuban have famously supported cryptocurrency. Others, though, like Warren Buffett and Charlie Munger, have long criticized it.
It's true that cryptocurrency is volatile -- as the past year of ups and downs has proven. But there are a few reasons why I still invested in both Bitcoin (BTC 0.70%) and Ethereum (ETH 0.27%).
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1. It could be the next big thing
Nobody knows what the future has in store for cryptocurrency, and it's true that it could end up failing. But it could also have real utility someday and revolutionize a variety of industries. Even if cryptocurrency itself does not become a standard form of payment around the globe, there are other paths to success.
For example, take blockchain technology, the foundation beneath cryptocurrency. The Ethereum blockchain, in particular, is home to many applications including decentralized finance and non-fungible tokens. Both the Ethereum and Bitcoin networks also host smart contracts, which are digital agreements that could potentially revolutionize the legal industry.
All of these applications require the use of cryptocurrency to some extent. If any one of them becomes widely adopted, Ethereum and Bitcoin -- and those who've invested in them -- will reap the rewards.
2. I may regret not investing someday
Cryptocurrency is a risky investment, and some experts predict it will either be a massive success or a massive failure, with no middle ground. When I consider those two options, I would rather take the risk than potentially miss out on something big.
Before I invested, I thought about all of the possible outcomes. I could invest now, and either make money if crypto succeeds or lose my investment if it fails. Or I could choose not to invest, and avoid losing any money but miss out on potentially lucrative returns.
Personally, I would rather risk losing money than live with the regret of not investing if cryptocurrency thrives. Of course, nobody knows whether it really will succeed. But if it does and I chose not to buy into it, I will likely regret that decision for a long time.
3. The rest of my portfolio is solid
There's no denying that cryptocurrency is a risky and extremely volatile investment, and it is highly speculative at this point. While I believe there's a chance it could succeed, I know that's not a sure thing.
For that reason, I've only invested a small amount of money that I can comfortably afford to lose, and the rest of my portfolio is made up of solid long-term investments. This way, if my crypto investments don't perform well, it won't sink my entire portfolio. And by continuing to invest consistently in areas outside of cryptocurrency, I can ensure my savings will keep growing over time regardless of what the crypto market does.
By taking the right precautions, it is possible to reduce your risk when investing in cryptocurrency. However, it's not the right investment for everyone, and that's OK. By considering your personal preferences and tolerance for risk, it will be easier to decide whether it's the right choice for you.
