Expectations for long-term investments in cryptocurrency: Long-term investors generally hold on to their investments for several years or decades to increase their returns. Therefore, if you believe that blockchain-based technology will explode in the future, investing in cryptocurrency in the long term may be an excellent option. With more than 19,000 different coins and tokens on the market, investor interest is growing rapidly. However, choosing the right combination to maximize your long-term profitability can be overwhelming.
Bitcoin is a volatile asset as you track it day by day. However, it has been the best-performing investment asset over the past 10 years, and a recent network upgrade to add features will make the platform more useful and could make the currency more valuable. Ethereum is in the process of being updated. Initially called Eth2 and now known internally as The Merge, the result will be an improvement in the scalability, security and sustainability of the network, according to the Ethereum website.
While the Ethereum upgrade could level the playing field, Cardano's popularity among decentralized application developers could keep demand for its ADA token high. In the 24 hours after Cardano's recent “hard fork”, or change in its protocol, more than 100 smart contracts were implemented on the network, according to CoinMarketCap. Cardano led the group during a recent rally, gaining up to 40%, CoinDesk reported. The rally followed a massive cryptocurrency sale that reduced overall market capitalization by 30%.
Let's say you have years left before your retirement date and you decide that you need to devote at least 20% of your investment portfolio to aggressive investments. If that's your case, long-term cryptocurrencies could be a way to obtain high returns. Formerly known as Binance Coin, BNB is the cryptocurrency asset backed by Binance. It allows users of the Binance exchange, which facilitates the daily trading volume of billions of dollars, to benefit from a 25% reduction in trading fees.
In addition, and perhaps most pertinently, BNB is used to pay transaction fees on the Binance smart chain. For example, Ethereum and Solana can handle approximately 16 and 65,000 transactions per second, respectively. In addition, while transactions on the Solana network are almost free, Ethereum fees are still expensive. So, if you think that Ethereum's dominance of smart contracts won't last forever, Solana could be the best cryptocurrency to invest in in the long term.
For example, at the time of writing this article, Bitcoin is down 30% over a 12-month period. On the other hand, BNB has risen in value by approximately 43% over the same period, meaning that it has surpassed Bitcoin. With more than 18,000 cryptocurrencies listed on CoinMarketCap, it goes without saying that competition is now extremely fierce in the blockchain field. However, experienced investors know that getting rich doesn't usually happen overnight.
It often requires long-term planning and a disciplined approach. Despite being a relatively new asset class, cryptocurrencies may already be a viable long-term investment worth considering. Next, we'll look at how to invest for the long term and more. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people achieve financial freedom through our website, podcasts, books, newspaper columns, radio programs and premium investment services.
In addition, blockchain technology has the potential to alter the financial system, making payment and savings products more efficient. With that in mind, Ethereum (ETH -2.13%) and Solana (SOL -3.85%) look like smart long-term investments. Decentralized finance (DeFi) has the potential to reshape the world. DeFi products allow people to invest, borrow and earn interest on money without the help of traditional financial institutions, such as banks.
Eliminating those intermediaries makes the financial system more efficient, and Ethereum is at the center of the DeFi movement. Ethereum also benefits from a significant network effect that should keep it at the forefront of the industry. Every software developer in the Ethereum ecosystem creates incremental value for each user and vice versa. That dynamic should continue to drive innovation in Ethereum.
As that trend develops, demand for the underlying cryptocurrency, the ETH coin, should increase in price. Solana blockchain aims to be a better version of Ethereum. Its core innovation is a hybrid consensus mechanism that combines the participation test (PoS) with the history test (PoH). The PoH protocol keeps validators honest by requiring them to participate in the network; the PoH protocol timestamps transactions as they occur to create a verifiable order of events, substantially accelerating performance.
Even more exciting, Solana Pay went live earlier this year, offering fast and cheap blockchain-based payments to merchants. Solana Pay allows consumers to transact directly with merchants, eliminating banks, card networks and other intermediaries. Better yet, consumers can make payments with stable currencies like USD Coin, meaning they don't have to spend volatile crypto assets. That technology could reshape the business world.
Yes, in fact, investing in cryptocurrencies in the long term is a more appropriate strategy than trying to outperform the market in the short term. When investing in cryptocurrencies with an average cost in dollars, the number of coins you buy each time you invest depends on the currency's trading price. While these returns are unlikely to be seen again, cryptocurrencies could still surpass traditional investment markets in the near future. However, if you can capitalize on the volatility of cryptocurrencies by buying at low prices, your investment may offer a solid return in the long term.
A long-term profitable investment in cryptocurrency is one with a value that appreciates over a period of time that adapts to your investment objectives. The most viable method to consider adopting when investing in cryptocurrency is a long-term buy and hold strategy. Looking at the relatively short history of cryptocurrencies provides a similar answer to the question of whether cryptocurrencies are a good long-term investment. However, it's crucial to note that investing in cryptocurrency exposes your investment to volatility and numerous risks, such as wallet hacking.
Instead, keep your investments in the market for extended periods of time to achieve the best return on investment. If you're wondering whether or not you should make long-term cryptocurrency investments, consider the key points discussed below. Select one or more specific cryptocurrencies and invest only the money you can afford to lose if the investment goes south. .