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Cryptocurrency Investment Fund: Bitcoin and Ethereum

What are the best cryptocurrency investment funds ? It is profitable? When you start investing, cryptocurrencies like Bitcoin and Ethereum often draw investors for the big moves they experience. But as well as generating great benefits they also carry a risk. In this article we break down everything you need to know about investing in cryptocurrencies.

Invest in Cryptocurrencies Through Funds

Cryptocurrency investment funds try to make it easier to invest in these assets . This is due to its ability to diversify. Not only will we find Bitcoin funds in the market, there are funds that incorporate other cryptocurrencies, other assets, related businesses, etc.

The truth is that, at the moment, investing in cryptocurrencies through investment funds is the only sensible option for the average investor, if we take into account the risks that direct investments present. But…

  • What can we expect when investing in Ethereum and Bitcoin?
  • Is it advisable to invest in Bitcoins?
  • Can cryptocurrencies become the currency that sustains the financial system?
  • What does a cryptocurrency investment fund give us?
  • What are the benefits of diversification?
  • Why invest in cryptocurrencies?
  • How to know the risk is adapted to our profile?

If you want to know the answers, read on.

The Rise of Cryptocurrencies

Cryptocurrencies have the potential to become the base currency of the future . They have all the necessary elements.

Could they be the basis of the monetary system?

Only time will answer this question.

The point is that these digital currencies have two characteristics that make them similar to the deposit of value that has performed this function throughout history: precious metals; with gold as standard bearer.

How are they similar?

Is a Limited Asset

Curiously, cryptocurrencies are extracted by a process of solving mathematical algorithms, which is called “mining”. And it is that in reality it is about extraction, just like precious metals, only in this case we talk about “digital mining”.

The amount of existing money supply in the market depends on these mining processes. Therefore, there is a limited amount of supply until more coins can be mined.

If, for example, we refer to Bitcoin, only a total of 21 million monetary units can be mined, this amount is the entire monetary mass. It could be likened to all the gold on Earth, mined or unmined.

Bitcoin is a limited resource . It will just be extracted and there will only be a certain amount of money.

Any currency can be printed by a Central Bank. It is not a limited asset. There is a limited amount of precious metals on the planet, this has given them the value they have.

In the digital world there is also a limited amount of Bitcoin and other cryptocurrencies. Upon reaching 21 million Bitcoins, no more can be mined . On the other hand, Ethereum is an unlimited asset, the amount that can be mined is infinite; but the cryptocurrency market trend forces you to trade accordingly.

Invest in Ethereum and Bitcoin Through Mining

Indeed, you can invest in cryptocurrency mining . All you need is a computer with sufficient graphic power (there are cryptocurrencies that are more demanding than others in terms of mining). However, the competition is fierce (plus the need for high-yield material) and investing in Bitcoins, Ethereum and other digital currencies using this strategy does not usually make sense.

By mining Ether (the currency of the Ethereum network) or Bitcoins, you get a reward in the form of these coins. It is like a salary for putting the computer equipment at the service of the network . For example, if we want to invest in Ethereum through mining, about 5 Ether would be obtained for each mined block.

It is not Controlled by Monetary Policy

Like gold, cryptocurrencies do not depend on a specific monetary system , therefore, they cannot be subject to “manipulation” by Central Banks, as is the case with the currencies they issue.

Any currency is under the control of a Central Bank. It is this body that decides to set interest rates and the amount of supply in the system. This is called “monetary policy” and its objective is to control inflation.

If inflation rises to worrying levels, the Central Bank applies a restrictive monetary policy. It raises interest rates and absorbs through operations in the money market in circulation.

As there is less money in the system and also with a higher interest rate, inflation is reduced because purchasing and investment capacity is reduced.

The same can be done in reverse, when there is a risk of deflation, as is the case in Europe.

This never happens with gold or precious metals. They are not controlled by a Central Bank and at the expense of a specific monetary policy. Nor to the levels of inflation in an economy, for this reason it has been a refuge value.

It turns out that cryptocurrencies also have this same characteristic . They cannot be affected by monetary policy, therefore, their value depends solely on what is freely assigned by the market. This issue makes speculating with Bitcoin and other cryptocurrencies more complex.

To learn more about how this metal has worked and to get an idea of ​​what cryptocurrencies can represent, we recommend that you read this complete article on investing in gold .

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