Investing was once limited to stocks being purchased in companies. Over the years, investing has evolved to a variety of options, which include digital assets. When hearing the term “digital assets,” cryptocurrency may be the first thing that comes to mind. Investing in cryptocurrencies is exciting, but it is also possible to diversify a portfolio with other types of digital asset investments.
Cryptocurrency is digital money that is managed using blockchain technology instead of traditional financial institutions, such as banks and credit unions.
Benefits of investing in cryptocurrency include:
- Opportunity to earn a strong return on an investment
- Security safeguards against fraud
- Accepted internationally for payments
- Increasingly recognized by financial platforms
Risks of investing in cryptocurrency include:
- Value increases and decreases significantly from day to day
- The uncertainty of how cryptocurrency will evolve in the future
- Potential for losing money if consumers cannot access their digital wallet
For those not interested in cryptocurrency, they may consider digital platforms.
Benefits of investing in platforms include:
- More diverse than cryptocurrency because they bridge the gap for compatibility with businesses
- They offer varying benefits for cryptocurrency purchases and trades
Risks of investing in platforms include:
- Some of their algorithms may have a high cost, making them too expensive for many people
- They may not be as decentralized as cryptocurrencies can be
Just as cryptocurrency is a decentralized system for money, decentralized applications offer freedom from operating systems and singular authorities.
Benefits of investing in decentralized applications include:
- There is no central server
- Payments do not require a third party for facilitation
- Open sources leads to more transparency
- Risks of investing in decentralized applications include:
- A high network load can lead to increased fees and drive away users
- The ecosystem is constantly changing, so consumers must continue learning
Non-Fungible Tokens (NFTs)
NFTs are a form of digital art. Many NFTs consist of internet memes, music, and even writing elements, such as social media posts.
Benefits of Investing in Non-Fungible Tokens include:
- An investment may increase in value
- Consumers own something popular and unique
- The ownership is digital, so it is easier to track than physical assets
Risks of Investing in Non-Fungible Tokens include:
- Consumers cannot convert physical art into digital art
- Ownership does not always mean that consumers own the copyright
- Blockchain technology is arguably not environmentally friendly
Maybe consumers want to take a step toward investing in digital assets but do not want to jump in with both feet. Wealth advisors can help consumers who are considering investing in companies that are transforming the realm of digital asset investments. These companies include:
- Payment gateways
- Crypto miners
- Crypto holding companies
- Crypto trading companies
- Patents for digital assets and digital services
- Banking and asset management
As cryptocurrency is gaining acceptance and popularity, digital asset investments are becoming more commonplace. The blockchain technology used to manage cryptocurrency opened the door for additional types of digital investments — some of which cannot be fathomed. While the technology is fairly new, digital asset investments prove to be resilient in vulnerable markets. For people with extra money to invest, digital assets are a smart venture to talk about with a wealth advisor.