There is no doubt, Bitcoin has returned.
It cannot be denied that cryptography has become one of the most fascinating corners of finance, especially since the assets’ global market capitalization now exceeds $ 3 trillion. According to Scott Shapiro, Senior Director of Product of CoinbaseEveryday investors should not ignore the impressive growth of cryptography. If they do, he says, they can be registered.
“At some point, you are on the sidelines if you do not become someone who has any cryptography because the financial world is modernizing and becoming more open, and cryptography is the way this happens,” says Shapiro. The fortune.
Despite exaggeration, cryptographic markets remain slightly regulated and subject to extreme volatility of prices, so most Americans do not want to risk an investment. It is one of the driest investment assets classes, warns Ariel Zetlin-Jones, a professor of economics at the Tepper School of Business at Carnegie Mellon University. But he even admits that it is not a bad idea that investors add a little cryptography to their portfolio, if the risks are understood.
Crypto is still a young and dynamic market that is still being developed, which means that the best investment strategies are not.
The investors’ journey always begins with an in -depth investigation, but this is especially true when it comes to cryptocurrency. Your decisions must always be based on facts, not on whims. This includes learning as much as possible About coins, exchanges and portfolios.
Crypto is one of the most discussed topics on platforms like Reddit, but wise investors should discount the tips that offer strangers anonymous on social media platforms. They do not have your best interests in the heart. The same is true of the research materials offered by the platforms and cryptographic exchanges.
Zetlin-Jones warns that most memecoins are similar to non-fungible tiles (Nft), which were popular several years ago. Although they may attract your attention, for most people they are not a good economic movement.
“We have a lot of evidence now that most people who invested and buy NFT ended up losing money,” says Zetlin-Jones. “This does not mean that no one made money, and this does not mean that there are still no valuable tiles not fungible today, but it means that most people who invested lost money. I think the memecoins are quite similar. ”
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Markets are volatile by nature, but it is essential to recognize that cryptographic prices are especially volatile. It can be easy to look bitcoin and see that it has been quintucated in value for the past two years. Not many people will complain about returns like that. However, if you look more closely, there are some red flags. For example, between July 29 and August 5, 2024, the Bitcoin price dropped by 22%.
“If you look at daily returns for short periods of time, their volatility of their returns is a greater order of magnitude than others than the economists or actors in the financial markets consider risk assets, such as the S&P 500 daily,” says Zetlin. Jones.
When you buy coins, keep in mind that the price could increase and drop dramatically at any time of the day. For some, this may seem fun, but for others, this could mean a financial weakness.
There are currently millions of cryptocurrencies available and having a well -diversified portfolio of cryptographic assets can help mitigate dramatic volatility and make investments less risky in the long term.
Investors should only turn cryptography into a smaller part of their larger investment portfolio, after index funds, ETFs, fixed income assets and individual actions. Traditional financial assets are much less risky than crypto.
“I think there is a growing consensus that a part of your portfolio in which it is invested (cryptocurrencies) does not offer a bad idea,” says Zetlin-Jones. “But people should understand the risks they run when they expose part of their portfolio to these very risky assets.”
For those who want to learn by doing but want to avoid the risk, stable coins They are a route. They are linked to assets such as Gold or US dollar, and the strongest have avoided great volatility. Just notice that being called stablein is not a guarantee of stability: the platform of Stablecoin Earth / Luna, for example, was involved in a Great merger of the cryptocurrency market by 2022.
Cryptocurrencies have its advantages (the market never closes, for example) and can eliminate barriers such as treating with financial market intermediaries, international borders and commissions.
“Unlike investing in company shares through traditional actions, investing in cryptography offers investors the opportunity to negotiate 24 hours a day, 7 days a day, support projects Blockchain who are interested in, collecting and marketing digital assets and memories like NFT, and much more. ” said a spokesman for Crypto.com
Shapiro adds that cryptography market is a much more efficient way to operate markets.
However, this comes with disadvantages. In addition to volatility and potential scams, governments and financial institutions offer much less consumer protections for cryptography users. If you think it hurts you in the cryptographic market, no one can do little.
Do not forget that any American who sells cryptocurrencies, receives them as a payment or has other digital transactions must declare it as part of your annual tax return.
Less than 1 in 5 Americans have experienced with crypto, according to Pew Research. President Trump has promised to bring the industry to the main current, and its administration is expected to do so create A Cripto Advisory Board. Trump’s choice to lead the United States Securities and Station Commission is a vocal defender of cryptography.
“We welcome the cryptographic support position of the new administration to advance digital assets innovation. We hope to see clearer regulations and policies designed to accelerate responsible adoption of cryptography, which will promote greater growth in the market Global and the industry as a whole, “said a spokesman for Crypto.com.
Depending on those who talk to the financial industry, they can have radically different views on cryptocurrencies. Although some investors will not touch it with a 10 -foot stick, others already use it in their daily lives to store, transfer and invest money. Shapiro, for example, says he has used the cryptocurrency to pay the rent.
Zetlin-Jones says that it is ultimately seeing how the cryptography will compete with the traditional banking network. “It is still one of the most volatile asset classes in financial markets … but it is a technology in search of a murderer application,” he adds.
If you join the millions of people who have immersed in cryptography, you must admit that it is quite different from traditional financial markets. The risk of losing money in a short period is high. And although the new technology is never perfect, cautious and informed investors have the potential to benefit.
This story was originally presented to Fortune.com
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