In terms of alternative means of investing, cryptocurrency remains a talking point.
The truth is this: it’s entirely possible to get rich investing in cryptocurrency but investing a large chunk of your money in crypto assets is also extremely risky. So risky is crypto business, that many investors regard pushing money into the stocks of companies invested in cryptocurrency to be a safer, if less profitable, option.
As such, we’ve taken a minute to weigh up the pros and the cons of investing in cryptocurrency.
Is It Safe?
Firstly, it’s important to keep in mind that any money invested in cryptocurrency isn’t shielded from the typical fluctuations associated with traditional investments.
In short: if huge fluctuations cause you to lose sleep, then cryptocurrency perhaps isn’t the right space for your money. As such, financial experts advise that any investments in cryptocurrency be restricted to 5% of an investor’s financial portfolio.
In the meanwhile, a solid emergency investment plan as well as a retirement fund are strongly recommended.
How About Long-Term?
Cryptocurrency greatly benefits from the so-called “network effect”. This refers to the idea of “majority rules”, meaning the more people are involved in the ownership of a specific financial asset, the more people want to become owners of that asset.
Cryptocurrency owners believe digital assets will increase in value over the long run because of the actual supply being fixed. This is unlike the supplies of typical “paper” currencies.
Since most currencies can be printed at will by bankers, there’s no “guarantees” when talking depreciation.
To Buy Or Not To Buy?
When talking investments, diversification is a valuable thing.
While in a modern-day society, this would certainly include cryptocurrencies, it remains important to ask yourself why you believe digital money capable of standing the test of time.
It is important that you’re able to manage the digital money investment as part of your overall financial portfolio.
The Two C’s
Experts advise that it’s important to be curious, but also cautious.
To this end, it is crucial that investors realise the absence of a regulatory framework in the area of cryptocurrencies. This makes it even more important that an investor does their homework, i.e., investigating the nature of the underlying token.
Another valuable piece of advice is to keep on learning. Since digital money is such a rapidly evolving concept, so is the overall knowledge.
The Risky Bit
What, then, are the risks associated with investing in cryptocurrency?
According to data provided by the Federal Trade Commission in the US, crimes involving cryptocurrencies are on the rise. Between October 2020 and March 2021, these losses amounted to a median loss of $1,900 per report.
The good news is that investors can typically prevent fraud from taking place. This is because crypto crimes typically involve cyber crooks requesting payments in cryptocurrency, or even sending out random offers to “make money” to crypto owners. If you steer clear of dodgy sites and only stick to using your crypto at the best betting sites, you’re on the right track.
How To Keep Your Crypto Safe
When investing in digital assets, it is super-important to keep your digital currency safe from hackers.
Be sure to check out the reputation of a digital wallet before leaving your cryptocurrency for storage.