Using Crypto for Other Investments

Is it a good idea to use cryptocurrencies to pay for other investments? While it isn’t wise to use Bitcoin to pay for a morning coffee, cryptocurrency is perfect for certain types of purchases and investments. How should crypto owners choose good investments? Why invest in crypto instead of fiat currency? 

Why Use Crypto to Invest?

Over 46 million Americans own cryptocurrency, with millions more all over the world. The popularity of these digital currencies is sparking interest in new ways to use them. Investing in cryptocurrency itself is often mainly about holding on to crypto assets while they accumulate value. In fact, the value of Bitcoin peaked at over $67,000 in 2021, which is 870 times more than the value of the coin was in 2013. 

Why should crypto owners use their digital currency to invest rather than simply holding on to it? There are many benefits to owning crypto, but the main drawback of any cryptocurrency is volatility. Cryptocurrencies are notorious for rapidly changing value, sometimes even losing billions of dollars in a matter of hours. 

By using crypto for other investments, crypto holders can secure some of their money in more stable assets. Of course, this begs the question, why not simply invest in stable assets using conventional currencies to begin with? 

This concern comes back to some of the main reasons people choose to invest in crypto to begin with. In some parts of the world, cryptocurrencies are actually more stable and more valuable than the local fiat currency. Additionally, there are legitimate cases where it would be beneficial to the buyer, seller or both to make a transaction using cryptocurrency. 

Ideal Investments for Crypto

What types of investments are ideal for purchasing with crypto? What makes something a valuable investment to make with cryptocurrency is more the benefits of crypto itself and less about what specifically is being purchased. There are a few main cases where it could be a good idea to use cryptocurrency for other investments. 

Smart Contracts

Smart contracts are one of the most useful features of blockchain-based currencies. A smart contract is an agreement that is entered into the blockchain and automatically activates a given response under certain conditions. 

For example, NFT art pieces can come with smart contracts that automatically give the artist a small percentage of royalty profits from every sale of their digital art. No one has to initiate this payment. It is coded into the smart contract so it will automatically activate under the appropriate conditions. 

Smart contracts can be used for things other than royalty payments, though. For instance, they could be used for secure voting or even real estate agreements. Investing in real estate can negatively impact credit scores, but cryptocurrency offers an alternative way to invest in real estate without involving fiat currency. By using crypto to invest in real estate, or similar assets, investors can also use the blockchain to enact a smart contract to protect their investment. 

Smart contracts give investors absolute transparency. Since the contract is stored on the publicly available blockchain, no one can make any unauthorized changes to it unnoticed. The blockchain also provides some added security to smart contracts since they can’t be easily lost or destroyed. Plus, the identities of those involved in the contract are concealed for privacy, while the contract itself is on a public ledger. 

So, cryptocurrency can be a great way to invest in other big investments, like real estate, where a smart contract would be helpful. Keep in mind that only certain cryptocurrencies support smart contracts, such as Ethereum. 

International Investments

Cryptocurrency may also be a good option for making international investments, such as purchasing a valuable asset from another country like a car or real estate. Since cryptocurrencies are decentralized and not tied to any one nation, investors don’t have to worry about losing money through exchange rates. 

This is especially helpful for people whose local fiat currency is unstable or weak against other currencies. Similarly, cryptocurrencies aren’t impacted by recessions or inflation. While crypto coins’ value fluctuates frequently, it is still independent from the ups and downs of fiat currencies. As a result, it may be more financially beneficial to make an international investment with crypto, particularly if inflation is impacting the local fiat currency. 

Anonymous or Independent Investments

Anyone could find themselves in a situation where they want to make an investment without compromising their privacy. Cryptocurrencies are perfect for this type of transaction. Investments can be made and authenticated through the blockchain to confirm the legality and legitimacy of the transaction. At the same time, the identities of the people involved remain protected by pseudonyms. 

These are often numeric identifiers on the blockchain that are used in place of a person’s real name. Blockchain identifiers can still be traced by law enforcement personnel, such as in the event of theft or fraud, but a typical blockchain user wouldn’t see others’ names on the ledger. So, there is a certain amount of anonymity with cryptocurrencies that still allows for safe transactions. 

Similarly, some people may want to make an investment without involving a traditional financial institution. For example, there are many situations where someone is unable to obtain a bank account, limiting their ability to use fiat currency. Cryptocurrency doesn’t have these limitations. Anyone can use cryptocurrency, making it an ideal or even necessary way to make investments when traditional financial routes are not an option. 

Making the Most of Cryptocurrencies

Millions of people are investing in cryptocurrencies today. While there’s nothing wrong with simply holding onto crypto coins, they can also be used to make other valuable investments. Choosing a good investment to use crypto for is all about making use of the key benefits of cryptocurrencies, including smart contracts, easy international transactions, and financial privacy. 

Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making any investment decisions.