Change and growth are often mutually exclusive. With the rise of new inventions and trends, comes cultural change, industrial and digital evolutions, and a new, improved way of living. The advantages of cryptocurrencies including Bitcoin touch various stakeholders and industries with the potential to positively transform the future.
Portfolio Diversification
One of the advantages that Bitcoin offers is embedded in the way it functions. Portfolio diversification is a basic practice of investing. With Bitcoin, this concept is made unchallenging as it can be done across different industries, asset classes, and investment vehicles.
Learning how to strike a balance between your degree of comfort with risk and your time horizon (the number of years until you expect to need the money) is one of the keys to successful investment. If you invest your retirement savings too cautiously while you’re young, you face the danger that:
1) Your assets won’t increase at a rate that keeps up with inflation.
2) They won’t grow to the level you need to retire.
The opposite is also true: if you invest too aggressively as you become older, you run the risk of leaving your funds vulnerable to market fluctuations, which might depreciate your assets at a time when you have fewer possibilities to make up for your losses.
Diversifying your assets is one method for achieving risk-reward balance in your investment portfolio. Although there are many alternative methods to combine assets under this approach, the fundamental concept is to distribute your portfolio over many asset classes. Diversification might possibly lessen the quantity and intensity of unpleasant ups and downs by minimizing risk and volatility in your portfolio.
Possible Long-term Protection Against Inflation
Bitcoin is often seen as a protection for one’s purchasing power unlike physical currency that loses value over time. Crypto is designed to be more resistant since its supply is limited and known (its scarcity makes it resistant); for example, Bitcoin only has a fixed supply of 21 million coins and this restriction helps with giving Bitcoin the upper hand over inflation.
Since it’s decentralized, there is no government intervention that can possibly manipulate the digital currency, unlike the euro or dollar for instance. Bitcoin could be compared to gold where the value of the product is in itself, making it an independent entity not bound by governmental decisions. Gold and Bitcoin share many similarities that might help it become the next ‘digital gold’. Taking all this into consideration, it could help establish a fruitful spending power in the future due to the fact that Bitcoin for instance might protect against a possible failure of a financial or monetary system (it is accepted worldwide and it is not subject to exchange and interest rates).
Because of the Covid-19 pandemic, the value of government-controlled currencies lost a lot of their value, however, assets with a limited supply such as Bitcoin saw their consideration going up. This large decline in currency values had severe effects on the global economy. It was the growing anxieties of individuals around the world that created a sense of collective acceptance for Bitcoin and cryptocurrencies.
Even with the global economic unrest and higher numbers of unemployment, Bitcoin kept attracting established investors believing in it as a protection against inflation among other reasons, which led to a history rise in its price by 250% in 2019 (Forbes, 2019). This is what acquiring a digital currency, independent of any state, offers an individual.
A Digital Future
Another advantage of Bitcoin is that it builds a long-lasting legacy for individuals. Indeed, it is believed that the future of money is cryptocurrency, that it will increasingly become digital, decentralized, and open-source. So, investing now in Bitcoin implies having an upper hand in the future economy and the future of consumer finance will belong to those who have already adhered to the Bitcoin sphere.
In fact, learning about Bitcoin and investing in it could possibly create generational wealth that will unlock endless opportunities for future generations. In 2021, mainstream businesses from several sectors showed interest in cryptocurrencies and Bitcoin technology, and in some cases, they even made their own investments. For instance, an enormous list of companies declared that they would accept Bitcoin as payment. By enabling customers to purchase on their platforms, fintech businesses like PayPal and Square are also placing a bet on cryptocurrencies.
Multiple experts predict that larger, global and international corporations will accelerate adoption even further in the second half of this year 2023. “We’re looking at institutions getting into crypto, whether it’s Amazon or the big banks,” Weiss Ratings says. A large retailer such as Amazon could “create a chain reaction of others accepting it,” adding “a lot of credibility.” This could gradually result in more stores taking bitcoin payments, which would alter the current economic environment.
Indeed, Amazon has actually recently sparked rumors that it is making moves in this direction by posting a job listing for a “digital currency and blockchain product lead.”
Based on this reflection, the future of financial possibilities looks bright. The characteristics of cryptocurrencies, other than the basic purpose it serves as contributing to financial freedom, are valuable and core to elevating the global economy and culture. Due to its significant market capitalization and technological infrastructure, Bitcoin has been deemed the most significant global cryptocurrency in today’s more common use of virtual currencies in financial operations.
Everyone stands to gain from the use of digital money due to better access to the global market and more opportunities for ownership, financial inclusion, and power. This is why interest in Bitcoin has soared over the years, not only among investors but also in popular culture. This is not to say that Bitcoin is risk-free. Indeed, there are several threats that may keep people from purchasing it such as its constant fluctuations that many don’t handle too well or the fact that it is unregulated, meaning that its value depends on the market and the people holding it.
As Satoshi Nakamoto stated, it is a “system for electronic transactions without relying on trust” and a “peer-to-peer electronic cash system”.
