5 Reasons You Should Care About Cryptocurrency
While market size alone may not be reason enough to join the ranks of crypto holders, it certainly justifies paying attention and considering your options.
Cryptocurrency is here to stay. With a combined market capitalization that briefly surpassed the $3 trillion mark in 2021, crypto is outpacing the market for many of the world's top stocks.1 Put it this way: If bitcoin was a business, it would be worth more than stock exchange giants like Meta (formerly Facebook) or Berkshire Hathaway!
While market size alone may not be reason enough to join the ranks of cryptocurrency holders, it certainly justifies paying attention and then carefully considering your options. Read on to learn why you should care about cryptocurrency and what its biggest advocates find so appealing.
1. It can help diversify your investment portfolio
Even amateur investors know that holding diversified assets is essential to building a robust investment portfolio. Increasingly, institutional investors are entering the cryptocurrency space as a way to provide that diversification to their clients.
The launch of the first Bitcoin ETF in October 2021 also launched cryptocurrency into the mainstream, offering institutional and individual investors alike a simple way to gain exposure to cryptocurrencies as an alternative asset.
Additionally, direct holdings of cryptocurrency coins is an increasingly popular route as access to user-friendly cryptocurrency exchanges expands. If you are looking at the appropriate allocation within your broader portfolio, your financial advisor can offer more personalized advice.
2. It can be a hedge against inflation
With U.S. inflation soaring to its highest levels in nearly 40 years, it's important to seek out assets that can hold their value even if inflation continues to rise.2 The traditional hedge against inflation is to invest in gold due to its finite supply—governments can always print more money, but the amount of gold is limited.
The same logic holds for certain cryptocurrencies like bitcoin and litecoin, which each have a finite supply of coins that can be “mined" over time. By setting a cap on the total number of these cryptocurrency coins, buyers can be confident that the market will never be flooded.
3. It cuts down on transaction costs by eliminating middlemen
Transaction fees can add up. Traditionally, bank customers have justified those expenses by noting the added layers banks provide around security and convenience. In addition, there was never really an alternative—that is, until cryptocurrencies came along.
Powered by blockchain technology, cryptocurrency has the potential to eliminate fees and can reduce transaction costs, all while keeping your assets safe.
4. It offers a new approach to keeping assets secure
Cryptocurrency transactions are recorded onto a digital and decentralized ledger, creating an irreversible record of ownership. Proponents believe that this approach creates a new standard for security.
5. It's universal
In our increasingly global world where financial transactions frequently cross borders, one of the major draws of cryptocurrency is that it's universal. From large multinational companies to individuals participating in e-commerce, the idea of using a worldwide currency to facilitate transactions holds widespread appeal. El Salvador has even adopted bitcoin as legal tender.
There's still a long way to go before you can travel to Italy and use bitcoin to pay for your gelato, but the increased adoption of cryptocurrency offers an appealing future where money truly becomes borderless.
Take on an open-minded approach
Whether or not the above reasons are enough to send you racing to purchase cryptocurrency, it's important to know and understand what crypto is and where it's headed.
Keep in mind that cryptocurrency markets move quickly. Don't wait too long to do your research, gain a deeper understanding of cryptocurrencies, and make a decision about whether they may be the right choice for your portfolio.
This does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment, including any of the product(s) mentioned herein, or an invitation, offer or solicitation to engage in any investment activity. This information is provided solely on the basis that you will make your own investment decisions, and Bakkt does not take account of any investor’s investment objectives, particular needs, or financial situation. It is strongly recommended that you seek professional investment advice before making any investment decision.
1Statistic. "Overall Cryptocurrency Market Capitalization Per Week From July 2010 to November 2021." Accessed Jan. 6, 2022.
2Bloomberg. "Charting the Global Economy: U.S. Inflation at Near 40-Year High." Accessed Jan. 6, 2022.