Leading cryptocurrencies, such as Bitcoin and Ethereum, have broken into the mainstream investment markets as prices exploded at the end of 2020 with Bitcoin now topping a record-breaking $28,000 in December. Moreover, significant developments are coming to crypto networks that can continue the momentum into 2021 and entice even the most hardened investors.
Here are some top reasons to consider investing in crypto in 2021:
Cryptos far out-performed stocks in 2020 (again)
The S&P 500 was up nearly 15% for the year and the Dow was up 5%, which would be strong gains in a typical year. However, Bitcoin far out-performed nearly all other assets and funds by closing out the year an impressive 250%.
The impressive gains were the result of record-breaking levels of buying on spot exchanges and on futures and options markets along with creating easier access with new on-ramps for investors from Robinhood, PayPal, and Square.
In 2019, Bitcoin closed up more than 90% and it’s up over 2,500% during the last 5 years. These gains far exceed traditional markets and every investor should take notice.
The adoption of crypto is exploding
Bitcoin’s price jumped in Q4 2020 when PayPal enabled crypto trading to its users for the first time. PayPal has more than 300 million consumers and 26 million retail merchants across 200 global markets
Their release also emphasized the importance of expanding crypto’s use case: “the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account, and signaled its plans to significantly increase cryptocurrency’s utility by making it available as a funding source for purchases at its 26 million merchants worldwide.”
In 2020 other companies such as Fidelity, Robinhood, and Square also provided new services that make it easy for consumers to invest in crypto and long-term investors can even consider cryptocurrency IRAs now for their retirement accounts.
Interest rates on crypto greatly exceed traditional bank offerings
Traditional banks offer very little interest on your dollars in a savings account or CD, often providing less than 1% annual return despite collecting over 20% in interest on their credit cards.
However, blockchain technology combined with automated smart contracts from Ethereum has unlocked a new ecosystem of safe lending and borrowing for individuals that can produce far higher interest yields.
Blockfi is a leading US-based crypto company and they provide up to 9.3% annual interest for lending crypto on their platform and decentralized finance projects (“Defi”) can offer even higher rates but carry slightly more risk.
For more tech-savvy individuals, they can earn a reward, similar to an interest rate, by “staking” their crypto to a network. Staking is a process where casual users can become validators, run a node on their laptop, and help secure the network. Ethereum is the most popular network to offer this and the rewards for doing so are over 10% APY. As of December 28th, 2020, there is over 2 million Ether currently staking on the network, valued at over 1.5 billion.
Portfolio Diversification
Savvy investors often look to diversify their portfolios to help manage their risk while keeping their positions in assets that may have higher opportunities for big gains.
While there are thousands of cryptocurrencies, the two largest by market cap are Bitcoin and Ethereum. While both assets are young, they’ve both proven to be more than a fad. Investment groups like Fidelity Digital Assets even state that Bitcoin should make up 5% of your portfolio.
Long-Term Gains
Bitcoin has matured greatly since its inception more than 10 years ago and with the growth in 2020, many investors are now projecting Bitcoin’s price to grow dramatically in 2021.
Popular analysts from around the globe are projecting Bitcoin’s price to pass $100,000 by the end of 2021, and some even speculate it could go much higher.
2021 is shaping up to be another banner year for crypto. Whether you’re looking to diversify, earn short or long-term profits, or just trying to get in on a new industry, Bitcoin, Ethereum and other cryptocurrencies should be considered by every investor.
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