Cryptocurrency is becoming more popular as investors learn how much they can make. Unfortunately, investing in crypto comes with risks, which is why many investors are still choosing to avoid it at all costs. While many individuals have become rich thanks to Bitcoin, there are just as many, if not more, who have made detrimental mistakes and lost all of their savings to unwise investment choices.
As mainstream adoption of crypto investing gains, you might be wondering if investing in crypto is right for you. If you’re nervous about investing in cryptocurrency, here’s what you need to know.
How to Choose What to Buy
While Bitcoin is the most widely recognized cryptocurrency, there are still a wide variety of crypto-related projects and tokens you can invest in. Before you commit to investing in anything, you should consider why you might want to invest in cryptocurrency. New investors should start with more established investment options like Bitcoin. While these investments are still risky, there’s more literature about investing in them than others that might mean taking on more risk.
Bitcoin is easy to buy and sell compared to niche coins, which makes it feel a little bit less risky than other options. Do your research before you decide what to buy into.
If you’re considering crypto as a long-term investment, then choose one that’s been around the longest so you can minimize your risk. You should always pass on the lesser-known cryptos because there’s no way of knowing how they’ll do. However, innovations in crypto are inevitable. If you’ve done your research and found another type of crypto you’d rather buy into, then feel free to trust your gut, but be prepared for losses.
You can also choose to invest in cryptocurrencies based on other aspects of their mission or where the company that started the crypto believes they’ll be going in the future. Remember, there’s a lot of technology involved in the process, so you never know where a company might take their tech in the future.
How Do You Invest?
Investing in cryptocurrency is simple; all you have to do is use an exchange like Kraken that will buy and hold your investments. As an investor, you’ll have a digital wallet that will hold your cryptocurrency without any outside involvement since crypto is decentralized and not controlled by the government or banks. Unfortunately, there are some risks associated with digital wallets, including the possibility of losing your password, which you can’t recover, and losing access to your funds with no way to get them back.
Exchanges typically have higher transaction fees than stock trading apps, but it’s important to avoid buying tokens because they’re being talked about on social media. Instead, start buying tokens in smaller amounts over some time until you feel comfortable.
Is Crypto As Risky As They Say?
The short answer is yes; crypto is one of the highest risk investing options. The average investor should avoid cryptocurrency because of how volatile it can be. Monitoring crypto isn’t as easy as monitoring stocks, so it can be difficult to make the right decisions or predict the future.
If you choose to invest, only use a small portion of your portfolio.
Other investors will choose to invest in crypto because of the risk. Typically these individuals can stand to lose the total amount they invest in crypto, which allows them the opportunity for a higher reward.
Investing in crypto is a roller coaster. You should never invest more than you’re willing to lose.
Simply put, investing in crypto is a big risk for investors of all types. It’s a young market, and the values of cryptocurrencies continuously rise and dramatically fall. There’s also no guarantee that values won’t completely collapse. As an investor, you’ll have no guarantees, and if you lose your money, then you can consider it gone for good.
Investing in crypto is more about speculation than it is about prediction. You only make money if someone else is willing to pay more for what you did for the tokens. If they aren’t, then you’ve invested for no reason. While there have been many people who got rich using crypto, there have been more people who lost everything they had to the volatile market. If you’re not willing to risk your money, then do not invest in crypto.
Your Reasons for Buying In
Before you make any financial decision, you should ask yourself why you want to do it. You should have a good reason for buying cryptos. If you’re simply buying in the hopes of getting rich, then it may be time to sit back and sleep on it before you give it a shot. While it is possible to get rich by investing in just about anything, you should never invest all of your money and hope for the best.
If you’re buying into crypto as an investment, then you need to realize it’s a high-risk investment, and you should never invest more than you’re willing to lose. While there can be high rewards, there can also be complete losses.
If you’re buying into Bitcoin as a currency, try not to digitize all of your money. Decentralized currency might sound like a great idea because it’s not controlled by the government or banks, but it’s incredibly volatile and can be unsafe, so there’s no reason to put your entire savings account into crypto.
While it’s true some businesses are adopting crypto, we’re still a long way off before you’re able to pay back loans using digital currency.
Investing in crypto comes with a lot of ups and downs. Only investors who are patient and willing to take on risks will be successful cryptocurrency investors. If you’re new to investing and interested in investing in cryptocurrency, make sure you do your homework so you can make the wisest decisions. Remember, only invest what you’re willing to lose so you don’t run the risk of losing everything.
Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. Matt is passionate about marketing and business strategy and enjoys San Diego life, traveling, and music.