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With trillions of dollars invested and all the hype in cryptocurrencies and new crypto news projects being rolled out daily, the question that many investors are asking themselves is whether cryptocurrencies are a good investment. Despite investors losing most, if not all, of their investment in scams like the Squid Game token, TerraUSD stablecoin, and other altcoins, is it still wise to invest in cryptocurrencies? Even with the incredible volatility experienced so far and stories about crypto millions made or lost overnight, would a prudent investor still look at putting their money into the market?

As cryptocurrencies mature and develop, such as we’ve seen with Bitcoin and Ethereum, we also see the emergence of such assets as a new asset class. To be sure, we’ve seen large professional fund managers, such as Cathy Wood from Ark Investment Management, creating dedicated investment funds solely investing in Bitcoin and other cryptos.

The said institutional investors also look to diversify their risks by keeping different investments that behave differently under the same economic conditions. Some argue that cryptocurrencies provide positive diversification effects, specifically against rising inflation. Moreover, we’ve seen the development of more investment instruments that capture the upside of not only specific cryptocurrencies, such as options and futures on Bitcoin and Ethereum but also specific investment funds that professionally manage cryptocurrencies on behalf of investors.

Lastly, one more positive is the fact that the sector is quite new, and as such there are potentially many more changes that may come down the line to make investing in cryptocurrencies even more attractive. Examples are stablecoins, which are cryptocurrencies that are linked to the value of a fiat currency and assets to back the digital currency. For those who worry about fraud, there can be more stringent regulations, say to deal with the Initial Coin Offerings, to help protect investors. We mentioned futures on cryptocurrencies and as the market develops, there can be futures on other cryptocurrencies that are traded on a reputable exchange. Futures also allow for cryptocurrency bears to sell the asset short, thereby improving the liquidity overall.