Cryptocurrencies have transformed from a dubious experiment into a serious investment category that attracts the attention of both individuals and institutional investors. Capitalia has also started operating in the field of cryptocurrencies, starting to offer loans with Bitcoin collateral, as well as gradually building its own company Bitcoin reserves. In this article, we have summarized several arguments why cryptocurrencies (with a focus on Bitcoin) could be a valuable addition to a well-diversified investment portfolio. portal.
Portfolio diversification
One of the most significant advantages of cryptocurrencies is their ability to improve the diversification of any portfolio. Traditional financial assets - such as stocks and bonds - often change their value in a similar way (correlated). In contrast, Bitcoin's price changes have historically not kept pace with stocks, gold, or bonds. Based on financial theory, this allows investors to reduce the risk of their investment portfolio while maintaining a high target return.
High liquidity
Cryptocurrency investments can be exchanged for everyday currency at any time of the day, both on weekends and weekdays. This is possible thanks to blockchain technology, which allows transactions to be made directly between users, eliminating traditional financial intermediaries such as banks or brokers.
Digital gold
Bitcoin was created with a clearly defined total number of these cryptocurrencies available - 21 million. Thus, unlike traditional currencies, the total amount of Bitcoin cannot be influenced by any central bank. Also, like gold, Bitcoin can be held by the owner himself (not in a bank or with a broker). Therefore, Bitcoin has gained a reputation as digital gold and is often used to safely store savings outside the traditional financial system.
Unbeatable historical returns
There has been no more successful investment in the last decade than Bitcoin. Over the past 10 years, the value of Bitcoin has grown by an average of more than 80% per year. For comparison, the US stock index S&P 500 has grown by 12% per year during this time period. Of course, it should be noted that historical returns do not guarantee similar returns in the future. It should also be taken into account that cryptocurrencies do not have any physical backing and their value comes from how much people trust and use them.
Market maturity
In 2024, the US approved the first Bitcoin exchange-traded funds (ETFs), making it much easier for both individuals and organizations to buy cryptocurrencies. Additional regulation in both the US and Europe has ensured that the cryptocurrency market is no longer the Wild West, but a regulated and monitored environment. A community of entrepreneurs offering cryptocurrency services, locally and internationally, has formed in the Baltics too. For example, Gravity Team is one of the largest cryptocurrency “wholesalers”, while Paybis and BTCBit are cryptocurrency exchanges.
Daily use
Cryptocurrency technology is increasingly beginning to infiltrate our everyday lives. For example, the brokerage firm Robinhood offers to buy stocks and index funds, the ownership of which is registered on the cryptocurrency blockchain. The most popular use of blockchain, however, is in the field of international transfers, allowing easy transfers in cryptocurrencies (stablecoins) pegged to USD or EUR values, bypassing the relatively expensive and complex banking infrastructure. Within Europe, we are used to fast SEPA payments, but if we ever tried to transfer money from Europe to Brazil, it would be much easier to do it on the blockchain than through banks.
There are also significant risks
Although investments in cryptocurrencies are becoming increasingly safe and are offered by increasingly well-known and trusted brokers and investment companies, there are a number of risk factors that are important to consider. First, fraud is still widespread in the cryptocurrency environment. If investments are made in cryptocurrency funds managed by internationally reputable companies, then there is no need to worry about this. But if you want to start buying and holding cryptocurrency yourself, then you need to be very careful and cautious. Also, although Bitcoin price fluctuations have decreased over time, they can still be rapid. Not to mention the price fluctuations of other smaller cryptocurrencies.
Interesting, but careful
Overall, cryptocurrencies have slowly established themselves as a new and exciting investment category. Investing in them can be a great addition to an already diversified portfolio of stocks and loans/bonds.
Useful suggestions on how to invest and earn
One can invest and save not only in bank deposits. The goal of this handbook is to inform about the wide range of alternative investment opportunities available to any investor. The target audience of this handbook is anyone who has established or plans to establish savings in the thousands (but not in the many millions) and who basically understands or is ready to learn what shares, bonds, investment funds and similar terms mean. The handbook content is regularly updated.
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