Many parents aspire to leave a legacy for their children, and from a financial perspective, this refers to the financial assets that you can pass from one generation of a family to another. These assets can be stocks, bonds, cash, and other popular investments such as cryptocurrencies. Cryptocurrencies have become a critical player in the pursuit of generational wealth, with numerous individuals attaining millionaire status in the US through digital assets. Bitcoin, in particular, has demonstrated massive profitability over the years, experiencing a remarkable increase in value. While many skeptics didn’t believe in the potential of digital assets, they have proved everyone wrong, as even today, people are still looking to understand how to Purchase Bitcoin and how to use it as a means to build generational wealth.
Why Should You Even Consider Building Generational Wealth?
Compared to wealth accumulated throughout your lifetime, generational wealth allows future generations to build upon an already established foundation. Generational wealth isn’t only about money or assets; it also encompasses the values, financial education, and practices that you pass down through your family, ensuring that future generations inherit the skills and knowledge to manage and grow the assets.
The benefits of building generational wealth are immense. For instance, it can make it easier for your children to pursue higher education, build a business, purchase a home, and invest in different opportunities that otherwise may not be possible to pursue.
Furthermore, generational wealth plays a role in breaking the poverty cycle and helps build long-term financial stability within families. The impact, however, can expand on entire communities, as families who are financially stable find themselves in a better position to donate to charitable causes and contribute to the economic wellbeing of their communities.
What Role Do Cryptocurrencies Play In Building Generational Wealth?
Since its inception, Bitcoin has been called the honey badger of money. A honey badger is known for its toughness, strength, and resilience, which are qualities that Bitcoin has displayed throughout its history. This fearless cryptocurrency has emerged stronger every time the market experienced tribulations, and now it’s clearer than ever that it’s unstoppable and will continue to be at the center of discussions in the financial industry.
While older generations are hesitant about buying Bitcoin, millennials are all in on it. According to forecasts, the digital asset could be worth $500,000 in five years, opening the door to endless wealth-building opportunities. Interestingly, major banks are creeping toward cryptocurrencies, and as soon as their presence strengthens, the financial system will likely never be the same again. So, instead of being a spectator, it may be worth getting on board with cryptocurrencies early.
Principles To Remember When Building Generational Wealth With Cryptocurrencies
While cryptocurrencies indeed offer opportunities for wealth-building, it’s essential to remember that they won’t make you rich overnight, so don’t fall into the trap of believing that it can happen. Instead, take a realistic and smart approach that will allow you to see gains. Here are the most important principles when investing in cryptocurrencies for wealth-building:
- Have a long-term perspective. A long-term horizon is always better when investing in cryptocurrencies. By holding digital assets for the long term instead of engaging in short-term trading, you can decrease the risk of losing value because of short-term price fluctuations that are so common in the crypto market. When you commit to cryptocurrencies for the longer term, you have the opportunity to benefit from price appreciation. Besides, this approach will prevent you from making impulsive decisions just because emotions take over and you think you need to act quickly so you won’t miss out on a big win.
- Do your homework and stick to the fundamentals. Examining a crypto project requires different metrics used in the stock market, which can include reviewing technical specifications, assessing real-world adoption potential, studying the developers and founders, evaluating competitors, and scanning community engagement, to name a few. We recommend choosing projects that have stood the test of time, provide unique capabilities, and enjoy widespread adoption. Some important fundamentals to research include the token’s scalability and speed, its utility, the network’s security, the experience and transparency of the team, and the competitive advantages that a specific project offers over others.
- Use dollar-cost averaging. Using dollar-cost averaging essentially means breaking down your purchases into small, recurring ones on an established schedule, whether weekly or monthly. Instead of buying manually every time, consider automating the purchases by using an exchange. This method is very helpful because you can methodically build a position instead of trying to time market tops and bottoms. As a result, the value of the assets you purchase will likely increase over time, which will help you mitigate volatility.
- Diversify your portfolio. Diversification means spreading investments across various asset classes, geographic regions, and industries, helping decrease the overall risk of your portfolio. This is based on the idea that holding various investments can create more portfolio stability as the better performance of an investment can offset the poor performance of another. Investment professionals agree that even if diversification doesn’t necessarily guarantee that you will never experience losses, it still represents one of the golden rules when investing in cryptocurrencies, especially if you want to build generational wealth. When it comes to cryptocurrencies, we recommend including large-cap or small-cap digital assets. Suppose you own mostly Bitcoin; consider adding emerging digital assets as well. If, on the other hand, your portfolio consists mostly of small caps, you can add Bitcoin to it to increase its value. You can also expand your portfolio based on different types of tokens, such as stablecoins, governance tokens, utility tokens, and so on.
The Bottom Line
If you’ve never considered the importance of generational wealth, now is the time to do so. Just think about it: you can change your family’s future if you take the right financial actions today. As highlighted in the blog, cryptocurrencies are key to generational wealth building, so take the time to explore them deeper and consider creating an investment plan to stick to in the long run.