If you’re already experienced in investing, then you already know that the term “invest in what you know” can be quite difficult to follow, especially when you’re trying to build a diverse portfolio. So even if you’re someone who can’t define what a blockchain is, even if it would save your life, you would still end up wondering if you should have your portfolio some crypto exposure.
Despite more than a decade of their existence, digital currencies seem to be not going away anytime soon. Cryptos have attracted numerous investors with both good and bad headlines while it worked its way through numerous peaks over the years. And despite crypto’s reputation for high volatility, the technology continues to attract new investors from all over the world with the potential of getting significant returns. So before you invest or choose a trusted crypto trading platform like Bitcoin Evolution, here’s what you need to know before investing in cryptocurrencies.
An Investment Asset That’s Highly Speculative
Digital currencies, in general, are highly speculative as they don’t have any intrinsic value that underlies most cryptos, unlike stocks, where they don’t necessarily track the growth potential of companies in the real world that sell real services and products. So if you’re going to invest in crypto today, remember that your primary source of a return from the investment is hoping that someone else is willing to pay substantially more than what you initially paid for.
Never Gamble What You Can’t Afford to Lose
When it comes to investments, especially to something as highly volatile as cryptocurrencies, you should never put money into an asset that you can’t afford to lose. So if you’re just starting, it’s highly advisable to only invest around 2% of your liquid portfolio into digital currencies, as you should only put in a small amount of money that has gone beyond your retirement, education, emergency, and home equity savings.
You’re Mostly Unprotected
Another big factor to consider before you start investing in crypto is how unprotected you will be when investing in them. In general, transactions and direct ownership of digital assets are essentially unregulated and offer little to no protection for its consumers. There is just not enough protection for consumers in crypto finance, lending, trading, and issuance, thus the significant increase in scams and fraudulent coins.
However, the rules and regulations to be implemented on reporting and paying taxes for cryptocurrencies are still in their early stages. The regulations we currently have are quite complicated if you ever decide to pay for goods and services with crypto on your own. Regardless, rules and regulations are most likely to increase in the future. However, they may or may not have a negative impact on its market value.
Find Ways To Get Exposed In Crypto
If you’re not yet comfortable with directly buying a digital currency and storing it in your preferred wallet, then there are more ways for you to get access. However, suppose you’re not working with a financial advisor. In that case, you also have the choice of getting exposed indirectly by purchasing shares in some other third-party investment in the market through some trading platforms. Regardless, if the Security And Exchange Commission approves Bitcoin ETFs, as well as any other cryptos, you should expect big players to offer them.
Final Thoughts
Cryptocurrencies, in general, are an exciting and interesting technological advancement that represents a form of digital currency that is decentralised as it doesn’t require some type of central authority to operate. Also, from an investment perspective, it can be quite exciting due to its potential to give high annual returns, considering it as one of the best-performing assets for the last 10 years.
Moreover, while investing in cryptocurrencies may seem a bit complicated at first, getting started can be relatively easy if you do your research. It can be as easy as choosing a reputable exchange, creating an account, and once you’re verified, you can now deposit real currencies for you to start your crypto investment journey. Also, get advice from your financial advisor with your current financial plan and how your digital currency investment may affect its overall progress.