Thinking of investing in crypto? Cryptocurrencies like Bitcoin have proven to be a profitable asset to invest in. Many of these digital currencies have risen dramatically in value since being introduced, allowing investors to quickly grow their money. However, investing in cryptocurrencies does come with its risks. Before you get involved in the world of crypto, here are some crucial things to consider.
Crypto can be volatile
While many cryptocurrencies have seen huge increases in value over the years, many have also experienced huge drops in value, making them incredibly volatile. These fluctuations in value are much more dramatic than you typically get with stocks or gold. If you’re looking for somewhere to invest your savings and forget about them, crypto is not the place to invest – you need to be prepared to check your investments regularly so that you can react fast if a cryptocurrency suddenly plummets in value.
Research is key
There are many different cryptocurrencies that you can choose from, and a variety of different exchanges where you can buy and sell crypto. It’s important to do your research into these different cryptocurrencies and exchanges – each of them come with different fees and attract different types of investors.
Timing is everything
When you invest is also important. You don’t want to invest in a cryptocurrency just as it’s about to plummet in value. Often, as with investments like stocks, the best time to invest is just after a dip in value. Look at the price history of different cryptocurrencies to help you predict when a cryptocurrency may be about to rise or fall in value.
Diversification reduces risk
Putting all your money in one cryptocurrency is very risky. If people lose faith in that cryptocurrency and it plummets in value, you’ll lose all your money. It’s much safer to spread your money across a range of different cryptocurrencies as it’s less likely all of them will lose value. This post offers some tips for crypto diversification.
The market is constantly changing
The crypto market is constantly changing – new coins, exchanges and laws are constantly being introduced. Be prepared to stay on top of crypto news in order to adapt to changes and protect your investment.
Your crypto needs to be kept secure
Cryptocurrency has several security benefits over traditional currency, but it can still be stolen by opportunistic hackers if you don’t keep it in a safe place. Rather than keeping your cryptocurrency in an online account, it could be wise to buy a cold wallet – this is like a USB stick for storing your cryptocurrency offline. Cold wallets are typically secured with a private key (a bit like a pin code). Only keep cryptocurrency in your online account if you are about to sell it.
Only ever invest what you can afford to lose
You shouldn’t invest all your life savings into crypto. The cryptocurrency market is still young and unpredictable – while it’s still much safer than gambling, there is still a risk you could lose all your money, so only invest funds you can afford to lose.