Crypto Isn’t Just a Currency, It is a Wealth-Generating Investment
Ever since the crypto market has skyrocketed – first in April and then again last month – people have been looking for ways to expand their crypto investment portfolio. Especially millennials and Gen Z are highly positive about cryptocurrency and decentralized financial markets. They are looking at cryptocurrencies as “vehicles of wealth generation.” While cryptocurrency is a relatively new investment asset, it has captured the interest of youngsters. The new generation wants to move completely digital; they do not trust traditional banking institutions and financial advisors. Instead, they want to rely on their research, and cryptocurrency gives them both the opportunity and freedom to do that. While there is no doubt that cryptocurrencies are volatile but so is every other vehicle of investment when it comes into being. It does not delegitimize that cryptocurrencies are one of the major investment classes in today’s modern world. The investment attitude and risk factors associated with crypto are the same as every other traditional asset. You have to be mindful while investing and should have a full-proof investment plan. But unlike conventional investment assets, you do not need to have a financial advisor to make an investment strategy for you. You can do it all by yourself with the help of research. It is not as complicated as you might think. The following factors should be considered before investing in cryptocurrencies:
- Allocating Funds: You should not put all your savings into cryptocurrencies, just like you will not invest all your money in stocks. It is usually recommended to limit your cryptocurrency investment portfolio to 7.5-10%. Even though cryptocurrencies are witnessing a rise in prices, you cannot bet all your savings on them. They are still highly volatile and speculative. Just as you can make massive gains, you can also lose your money.
- Research: It is imperative to conduct your research before investing in cryptocurrencies, just like you do for bonds, stocks, or properties. You should know the various kinds of coins in the market and which coin is the best for you. Exchanges like Binance allow you to organize your cryptocurrencies by price, market capitalization, price changes, etc. You should research the supply, market value, capitalization of the coin.
- The goal for Investment: You must think about the short-term and long-term goals of your investment. How long do you want to hold your crypto assets? How much profit do you want to make from your investments?
It is crucial to make an investment strategy and stick to it. You should not drastically increase your investment if the prices are going up. This is because prices can go down as quickly as they have gone up. Therefore, you must stick with your investment strategy.
Crypto Millionaires and Billionaires
These days even people in their early 20s are taking a keen interest in cryptocurrencies. A recent CNBC Millionaire survey suggested that nearly half of the millennial investors have 25% of their wealth in cryptocurrencies. The crypto boom has facilitated in creation of wealth for such young investors. Over one-third of millionaires have more than 50% of their wealth in cryptocurrencies. This survey reflected on the generational gap in wealth creation from cryptocurrencies. The younger investors have seized this opportunity and capitalized on the crypto boom, therefore, increasing their wealth. On the other hand, older investors are not too keen on investing in crypto. 83% of American millionaires do not have any of their wealth in crypto. Similarly, around 50% of younger millionaires own non-fungible tokens (NFTs). They also believe that NFTs are the “next big thing.” 40% of those millionaires do not own NFTs, but they have considered buying them. The younger generation has a positive outlook on the future of blockchain and cryptocurrencies and is therefore interested in investing. At the same time, they are disinterested in other traditional investment assets, so investing in the crypto space seems fun. For the millennial and Gen Z population, crypto has allowed them to enter the investment sector mainly dominated by baby boomers. They can quickly join the crypto market and earn in the same way as venture capitalists. Therefore, crypto levels the playing field to some extent. Unlike traditional assets, they do not need a lot of money to buy and invest in cryptocurrencies. Crypto has democratized the investing space – enabling and empowering people to invest. Also, the younger generation is more internet and tech-savvy, so they feel at ease while investing in crypto compared to using a brokerage.
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The younger generation is also worried about their retirement wealth plans. They do not want to invest in traditional vehicles as their parents did. They have seen its inefficiencies which have made them believe that traditional investments cannot be trusted. Therefore, they are driven towards an investment vehicle that gives them more control, financial freedom, and independence from the intermediaries. A decentralized cryptocurrency coin offers them all, thereby making it attractive to youngsters. Another feature of cryptocurrency which lures younger investors is – the fun. You can have fun with your cryptocurrency investment. This is relatively evident when we think about the case of dogecoin, which is a Shiba Inu dog meme. But it became so popular that even Elon Musk, Founder of Tesla, promotes it now. Currently, it is amongst the top 10 cryptocurrencies in the market. It was created as a meme not to be taken too seriously. But the fact that it takes away the scary aspects of investment makes it so attractive. People usually think of a suited-up middle-aged guy when they think of the stock market. Look at dogecoin, and you get a completely different image about financial investment. Many younger investors started investing in cryptocurrencies just for “fun” initially and then later became long-term investors after they reaped its benefits.
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