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Here's Why Americans Are Investing in Cryptocurrency

The Motley Fool logo The Motley Fool 10/4/2021 Christy Bieber
Here's Why Americans Are Investing in Cryptocurrency © Provided by The Motley Fool Here's Why Americans Are Investing in Cryptocurrency A young businessman uses his tablet to look over his investments. © Getty Images A young businessman uses his tablet to look over his investments.

A growing number of Americans are investing in cryptocurrencies like Bitcoin and Ethereum. These investments are volatile ones that carry more risk than many other more established asset classes -- but they have the potential to pay off as well.

Recently, SurveyMonkey looked at why Americans have made the decision to invest in cryptocurrency. Here are the top reasons why people are motivated to buy virtual coins.

1. The potential for long-term growth

According to the SurveyMonkey data, 60% of people who have invested in cryptocurrency indicated they've done so because they believe this investment has the potential for long-term growth.

This is most likely the least risky and most sound reason for investing in cryptocurrency. That's because you're less likely to suffer big losses when you make a long-term investment -- especially if the asset you're investing in is a volatile one.

A belief that crypto's value will grow over time means that you don't have to try to time your investment perfectly to buy when the coin value falls and sell when it rises. Instead, the hope is that the price of the coins will go up enough over time that you end up making a profit even if you didn't buy at rock bottom.

Of course, in order for this potential for long-term growth to pan out, investors would have to remain interested in the particular cryptocurrency they've purchased over the long-term, and the coin's value would actually have to increase over that time period. And, with most coins having limited practical value in the real-world since they can't actually be used as a form of currency with most businesses, there's no guarantee this prediction will pan out.

2. The potential for high growth over a short time

While some investors in cryptocurrency have chosen to buy coins because they believe their investment will pay off over the long-term, others are motivated by a hope for quick profits. In fact, 44% of crypto investors indicated they've purchased coins because of the potential for high growth over a short-time period.

This is one of the riskier motivations for investing in cryptocurrency. Unfortunately, whenever you hope to make a short-term profit with any investment, your success is dependent upon your ability to time your purchases and sales perfectly.

This can be a huge challenge since it can be impossible to predict what will happen with the price of assets from day to day -- especially with more volatile assets such as digital currencies.

3. The excitement of investing

Finally, just over a quarter (26%) of crypto investors indicated they've made their investment because of the excitement of trading.

Now, there's nothing wrong with being excited about growing your wealth. But if your sole motivation for investing is excitement, then that's not really investing at all but instead is more like gambling. Rather than buying assets just because you're excited about them, it's best to focus on the likelihood that your investment will pay off for you.

If you're eager to put your money on the line in hopes that you can grow it, you should take the time to carefully research each investment option you're looking at. Consider it's performance track record, its business model, the potential for growth, how volatile it is (how quickly and substantially its value shifts), and the likelihood it will provide a positive return over time through different economic conditions.

In many cases, less exciting investments have a much better track record of earning you money. And you may be more excited to watch your brokerage account balance grow over time than to make investments in coins that may not pay off for you in the long-run.

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  We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Ally is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber owns shares of Citigroup. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
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