The increasing number of cryptocurrencies can make
it hard to choose while the cryptocurrency industry continues to boom,
some investors are growing weary of the market’s volatility which coins to
invest in.
Still, you can feel confident about your investment decisions with
some research and careful planning. For example, let’s look at the pros and
cons of investing in cryptocurrencies.
1. Get informed
into a cryptocurrency, it’s wise to educate yourself about cryptocurrencies.
Once you have done your analysis, you can decide whether investing is right for
you.
If you choose/decide to invest, make sure you understand what type of
return on investment (ROI) you should expect from your currency.
How much do I need to invest? The answer depends on
how much risk you want to take on as an investor. If you choose to put all of
your savings into one cryptocurrency and that currency tanks, then all of your
savings go!
2. Set goals
general cryptocurrency goals, such as diversification or wealth building. If
you’re an experienced investor, write down short-term and long-term goals—such
as losing weight or growing your portfolio by 2x over the next two years.
Keep
your goals somewhere you can see them daily for inspiration and motivation. And don’t forget about our previous tip: track your
progress! When you reach one goal, you can set another one.
It may seem like
setting goals is a lot of work, but it’s much easier than figuring out where
you want to be without any direction.
3. Start small
carefully. While some people may see high-risk, high-reward as an enticing
proposition, playing around with your savings is not wise.
If you want to dip your toes into cryptocurrency
investing, start small. Buy $10 worth of Bitcoin or Ethereum—enough to learn
more about how things work, but not enough that you’ll be devastated if your
investment loses value.
You can always buy more later! (And if you lose money
on your initial investments, remember: There’s no shame in trying something
new.)
It’s also wise to diversify your crypto portfolio.
Although all digital currencies share specific characteristics, they also have
different values, use cases, prices, and potential returns.
Getting familiar
with multiple coins will allow you to assess their merits more quickly when
deciding what cryptocurrencies to add to your portfolio.
4. Learn the risks and
rewards
promising investment opportunity, cryptocurrencies have risks. Because they are
decentralized, these virtual currencies are vulnerable to hacker attacks.
If your cryptocurrency gets stolen or hacked—or
loses value—there is little legal recourse for you. The same can be said about
price volatility: although Bitcoin has shown impressive gains over time, it is
also highly volatile.
The key here is to do your research before making
an investment decision; while it may seem easy money now, there could be severe
consequences.
5. Know what you’re
investing in
Regardless of how you feel about Bitcoin, you
should at least be aware that it is entirely unregulated. If something happens
to your cryptocurrency investment (whether an exchange gets hacked), there’s no
recourse to getting that money back.
Not so with other investments—like stocks, bonds,
mutual funds, etc. These all fall under securities laws, which means investors
have more protection for their investments.
For instance, if a company goes
bankrupt, you can lose some or all of your investment. But if a cryptocurrency
disappears one day…it’s gone forever.
6. Don’t get emotional
just apply to personal finance. When investing, it’s essential not to let your
emotions get too high or too low when investing based on gut feelings.
And,
like there are different kinds of investments for our finances, there are also
different kinds for cryptocurrencies. Some use technical analysis (looking at
charts), some use fundamental analysis (looking at financial data), while
others are purely speculative.
So, how do you choose which type is right for you?
The answer lies in understanding what type of investor you are if you don’t
want to risk losing money by speculating on a cryptocurrency that could go down
50 percent tomorrow, then don’t!
Final Words:
You’ve probably heard about cryptocurrencies or
seen articles online about them. You may have wondered if you should invest in
one. The good news is that there are plenty of pros to investing in
cryptocurrencies like Bitcoin, Litecoin, or Ethereum.
Thanks to blockchain technology, these digital
currencies have many uses, are very secure, and are fast at completing
transactions. However, before deciding whether to invest in a cryptocurrency,
it’s essential to know its advantages and disadvantages. After all, nothing is perfect!
