Is it Too Late to Join the Bitcoin Boom?

If you’re willing to do your research, understand the market and have the kind of balls necessary to delegate management of your crypotos to people who can put them to work, you can take a spin on the wild side of crypto-currencies. Okay, also community, services and contributors, not to mention miners and ‘whales’ with thousands of cyrpto-coins in their digital wallets. Just remember, though, don’t invest in anything you can’t afford to lose.

They are also extremely volatile, fluctuating in price by thousands on a daily basis. Given these factors, prudence suggests that you should not put more than 2 per cent of total net worth into cryptocurrencies.

What is Cryptocurrency?

Crypto serves as a store of value, and yields returns similar to those on long-horizon assets such as stocks and bonds; however, low correlation with other asset classes may offer superior risk-adjusted returns.

Moreover, additional traits of this technological asset are the transparency and the lack of a central point of control (as opposed to fiat currencies), which permit to prevent fraud attempted through phishing or hacking, and make these assets useable across the globe without any bank or intermediary.

Cryptocurrency is still at the early stages of investment and, accordingly, you can buy or sell it through numerous online exchanges and investment platforms. This is why having a reputation for consistency, security and the correct application of regulation is of paramount importance for exchange performance. Diversification is the key – invest in at least several virtual currencies to balance yourself out of an extreme price swing as well as against market volatility. Check whether any minimum investments necessitate and beware of transaction fees.

How to Invest in Cryptocurrency

Thanks to the fast growth of the crypto market, people have multiple ways to invest their money, from buying outright to a more indirect route through a cryptocurrency exchange-traded fund (ETF).

Before putting your money into any ultra-high-risk asset, you need a plan and a fair bit of homework. And crypto investing in its current state, with price volatility and no existing protections such as SEC registration and disclosure, should demand even more homework.

Since it’s not too late to invest in cryptocurrency, it makes sense to look at the coin now in terms of how it’s used and to judge its past performance. If you want to invest in crypto, it also makes sense to diversify. Holding different crypto assets provides a hedge; no single asset in your portfolio will be too big a portion of your returns; within those assets, volatility is reduced by lessening the up and down within individual assets.

What are the Risks of Investing in Cryptocurrency?

Any investment in cryptocurrencies is extremely high risk. Cryptocurrencies, such as Bitcoin, are incredibly volatile, and you should only consider investing if you understand and can accept both the risks and the rewards of the emerging asset class.

Watch out as prices can be manipulated by shady practices such as pumps and dumps, where investors are coaxed in and then discarded. Small-cap currencies with low trading volumes are often victims of scammers, so you should do your research before putting in money.

Instead, remember that crypto investment is volatile, so put only a small percentage into it as part of your overall portfolio (a diversified portfolio might be a better bet, including stocks, bonds and real estate). And, lastly, customers should use crypto with caution, realising that when you buy it, you might be at risk of fraud or some cybersecurity breach, such as buying through a reputable exchange and putting crypto in a multi-sig cryptowallet to protect against hacks, according to Coates.

What are the Benefits of Investing in Cryptocurrency?

Despite the enticing figures one can acquire by investing in cryptocurrency, the benefits of risk are only accommodating after careful analysis. Investors must be willing to accept and embrace risk into their portfolio before enjoying any advantages.

Crypto offers autonomy and transparency on a decentralised network that’s difficult for governments to freeze or otherwise twist (dollars or euros can easily be stolen), and virtually impossible to counterfeit or hack because each and every transaction is publicly pilloried on the blockchain.

As with any investment, cryptocurrency prices could drop, and there’s no telling where they might end up. And remember, it’s only been 10 years since their introduction – in comparison with stock markets, the cyrptocurrency market is still very young, and there’s been little in the way of evidence as to their direction or growth.

It can be hard to tell if an investment in a yet-to-be-realised technological product is going to pay off, and high portfolio volatility can result from holding this untested asset class too heavily. You’ll want to have a conversation with a licensed financial advisor about your investing goals, your risk tolerance and the circumstances in which you want to invest before jumping in.