You can’t escape the cryptocurrency world these days. It’s the talk of the town in almost every industry under the sun, in particular, in investment circles. And what comes with it is the big challenge for investors not to get swept away because of its hype.
A decade ago, people would have pointed at you and laughed if you had mentioned you hold a part of your investment portfolio in crypto. But now, times have changed, and Bitcoin, Dogecoin, Litecoin, and Ethereum are some of the crypto buzzwords you’ll see trending a lot more often than not.
So whether it’s the retail and institutional investors bugging everyone to jump on the bandwagon or analysts putting up warning signs of caution, the fact is that crypto investment has forced important conversations to happen.
Many people now wonder whether investing in cryptocurrency is a good idea. Does it pay off, is it worth it, and what are the things you should keep in mind before leaping?
Let’s find out the answers to these questions.
What is cryptocurrency?
Much like other means of making money fast, cryptocurrency is a digital asset that people use for investments and online purchases. It’s replacing your real currency, but you use it to buy digital tokens or coins. So you’ll use actual dollars, for example, to buy cryptocurrency like Bitcoin.
Here’s an easier way to understand this; imagine you are going to a new country and you have to swap out the currency you have for another one. It’s the same thing for cryptocurrency because you exchange your money for crypto and then use it just like real money.
Each crypto coin or token has a unique line of code, which makes it impossible to copy. What this does is make it easier to track and identify during trading.
People can make hundreds and thousands of dollars from cryptocurrency investment but lose the same amount. It all depends on how you play the game.
Crypto investment strategies
Whether it’s a crypto investment or something else, one rule remains the same – do your research. And just like any other investment, there is some fundamental crypto investing strategies you need to know before you jump in.
1. Choose the right storage
Be aware that digital assets are held in two types of storage; hot or cold. Hot storage includes an online digital wallet, while cold is an offline wallet typically stored on a hard drive. Cold storage is particularly helpful if you want to stay safe from hackers.
Hot storage has its perks, too, because then crypto tradies can move in and out of positions quickly. The bottom line is if you have a solid storage strategy, you’ll be able to hold 80% of long-term funds using it.
2. Liquidity is important
The crypto investment market is a fast one. The reason is that there has to be a demand for cryptocurrency so market participants can get the best prices. It is only then that they’ll be able to get a profit. And that makes liquidity an important metric when figuring out how to invest.
Measuring liquidity is at the base of this because doing so helps to look at the recent trading volume of any crypto asset. This tells you how much cryptocurrency has been and sold, so the overall interest in the asset becomes clear.
3. Take your gains frequently
Many experts say that anyone investing in the crypto market should take gains frequently. This is because there is always the chance of cryptocurrency’s price sinking, just as soaring. The risk factor lessens with taking profits out regularly.
Risks of crypto investment
With every advantage comes to its risks, and the crypto world comes with a lot more than you think. You have to know the facts and not just go with whatever a Twitter crypto bro is trying to convince you of.
The value of cryptocurrency is always see-sawing up and down rapidly. You can never really predict what’s in store for the next day, and its extreme nature doesn’t make it the best option for those who don’t have that extra income lying around to play crypto with.
2. Unknown variables
Cryptocurrency investment is a fairly new realm that everyone is exploring. And even the biggest experts face things about the system that they have no clue about; a crypto investment calculator can’t solve all your problems.
The less you understand, the riskier it is to throw your hard-earned cash at it. So if you don’t have disposable income that you can use to try your hand at it, it’s better not to at all.
3. Fraud is a problem.
Scammers can be found everywhere, and not surprisingly, a good chunk of them have flocked over to crypto investments. Cryptocurrency makes hacking into your account without being tracked a whole lot easier.
Wrapping up: is it worth it not?
To a large extent, that’s up to you to decide. Analysts will continue to tell you to proceed with caution and do your research while everybody else making millions will urge you not to think and go for it.
Research is important, and you should think about why you’re interested in crypto investment to familiarize yourself with the domain before doing anything else. You may see big returns, but losses are also just around the corner.
It depends on how much of a capacity for the financial and mental risk you have.