Is Cryptocurrency A Good Investment Four Things To Know
Before you say good-bye to your dollars and hello to Bitcoin, Ether or Doge, there are a few things you need to know up front.
1. Cryptocurrency is unstable.
Its truecrypto is about as hot tempered as a 12-year-old. Its value swings way up, only to come plunging back down, and you never really know what youre going to get each day. The value of cryptocurrencies goes through extreme ups and downs. Theres no denying that some are really hot right nowbut for how long? Someone sneezes and the price drops! Investing in cryptocurrency is risky, to say the least.
But heres the crazy thing: A recent study by Piplsay shows that 50% of Americans think investing in cryptocurrency is safe.2 Fifty percent! News flash: Cryptocurrency definitely isnt a sure thingit carries a huge amount of risk. Lets be real here, all investing comes with some level of risk. But why jump all the way to the deep end with something this up and down?
2. Cryptocurrency has lots of unknowns.
Theres still a lot that needs to be ironed out with how cryptocurrencies work. Think about it: Nobody even knows who the founder of Bitcoin is! Only a small percentage of people in the world really understand the system and know how to operate it. Ignorance makes you vulnerable. We always tell people that if you cant explain your investments to a 10-year-old, you have no business investing in them to begin with. Youre setting yourself up for a big mess.
3. Cryptocurrency makes fraud easier.
How To Invest In Bitcoin
Investing in BTC is similar to investing in stocks, except far more volatile because of the daily swings in BTC. Here are the steps to invest in stocks from the beginning:
The main difference with BTC is for step three you buy BTC or another cryptocurrency instead of stock.
With BTC, the above flow is similar in most cases but it depends on the exchange or trading platform. In some cases, you can buy BTC using your credit card or by transferring funds from your bank account.
For other platforms, you must transfer BTC directly. This is known as a direct deposit of BTC.
Well discuss how to invest in BTC for US citizens. The methods vary across countries because of differences in laws and regulations. Some countries require more private information than others to verify you are legitimate.
Crypto Scams Are Increasing
There are two main types of crypto scams.
Scammers try to trick people into investing in fake opportunities to buy crypto. Watch out for these tactics:
- false promises of very high returns
- fake endorsement from celebrities or government agencies
- people who contact you through social media or text messages
- using dating apps to establish a romantic connection and gain trust
- multiple or constantly changing bank accounts used for transfers
Read more about the tactics used by investment scammers.
Rhett is scammed $97,000 by a fake endorsement
Rhett saw an article on a news website about The biggest deal in Shark Tank history, that can make YOU rich in just 7 days!
Rhett was interested in trading Bitcoin, so he provided his contact details. Soon, an Account Manager named Max began calling Rhett. Max called often, pressuring Rhett to open a trading account and make a deposit. By depositing between $40,000 and $50,000 upfront, Max promised Rhett he could earn at least $15,000 per month.
Max promised Rhett that the money he deposited would be safe because he would have total control of the account. Its more or less moving your money in your left pocket from your right pocket, Max said. Max promised Rhett that he could withdraw his money whenever he wanted to.
Rhett deposited more money in the hope he could recoup his losses. Rhett ended up depositing and losing a total of $97,000.
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Weve All Heard Of Someone Who Invested In A Cryptocurrency And Benefitted From A Large Return On Investment Experts Say Dont Do Anything With Your Money That You Dont Understand
Cryptocurrency has been controversial for long. Usually, investors are always doubtful about investing in it. As it is a volatile asset class, experts say, cryptocurrency investors should have a high-risk tolerance. For instance, the worlds largest cryptocurrency Bitcoin came to an almost 4-month low in April 2021. Earlier Bitcoin had dropped down by 50 per cent to $30,066 from its record high of $64,895. Ethereum had also dropped nearly 57 per cent to $1,850 during that month.
There have always been a lot of uncertainties in this class of assets. However, this has not deterred Indians from investing in this asset. But one should not jump into it unprepared. Do some research about the asset class before diving in.
Darshan Bathija, CEO and Co-Founder of Vauld, says, Do the work research read everything you can about the sector, the coins, the projects, the tech. Dont believe everything you read on social media.
He further adds, Weve all heard of someone who invested in a cryptocurrency and benefitted from a large return on investment. Dont do anything with your money that you dont understand.
Cryptocurrencies: How to go about investing in them?
Devise a plan for your cryptocurrency assets, for instance, a plan involving setting limit orders on trades, and exchange selection. Experts say one should ensure that the exchange one chooses provides strong levels of liquidity, an array of crypto assets, and is reliable.
Who is typically investing in cryptocurrency?
What Is Cryptocurrency And Why Should I Invest In The Same
Cryptocurrency. Its the buzzword in the world of investing in the present. But what exactly is cryptocurrency actually? Have you heard about Bitcoin, Dogecoin, Litecoin, XRP or Ethereum? Theyre not embarrassing names of rock groups in the 90s. Theyre actually a type of crypto . And theyre all the rage everywhere you go.
However, the million dollar problem is, should you make a bet on cryptocurrency? Contrary to what everyone on the internet shouts at you via their online soapbox Its not an ideal investment for your investment future. Well discuss this in a moment. Lets explore what crypto actually is.
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Ethereum Leading Cryptocurrency To Buy For Smart Contracts
Ever wondered if you should buy Ethereum right now? As noted earlier, Ethereum is the second-largest cryptocurrency for market capitalization behind Bitcoin. This project was launched back in 2015 and it dominates the smart contract niche. These are pre-programmed blockchain contracts that facilitate trustless agreements.
On the one hand, there are actually better-performing smart contract blockchains in this space namely Neo and Solana. This is in terms of transaction speed, fees, and scalability. However, Ethereum is getting close to its 2.0 migration which will see it move to Proof-of-Stake.
And, in doing so, Ethereum 2.0 will take its smart contract blockchain to the very next level. Not only in terms of lower fees and even faster transactions but being able to scale on a much larger level. As such, Ethereum is still one of the best cryptocurrency to buy in 2022.
Cryptoassets are a highly volatile unregulated investment product. No UK or EU investor protection.
The Beauty Of Crypto Stocks
The best part about cryptocurrency stocks is that most of them are not pure plays on the industry — giving investors the reward of ample diversification. Cryptocurrencies are quite volatile and can cause wild swings in the revenue and earnings of companies with sector exposure. However, the crypto realm is rapidly gaining mainstream adoption. In August 2021, United Wholesale Mortgage , the second-largest mortgage lender in the country, announced it would accept Bitcoin as mortgage payments from its customers. Expect further momentum in crypto stocks as more and more companies join in the blockchain revolution.
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Amazon To Accept Bitcoin As Payment
If the rumours are true, the technology company could accept bitcoin payments sooner rather than later which could drive the price of the cryptocurrency upwards.
Amazon is also said to be looking at launching its own cryptocurrency.
This comes after Amazon posted a job advert looking to hire someone to develop its digital currency strategy.
Amazon isnt the only tech giant to be branching into cryptocurrency there are rumours circulating that Apple will use some of its large cash reserves to invest in bitcoin.
Given the huge volatility and that the use case of crypto currencies is far from proven, traders should only dabble with money they can afford to lose.
Susannah StreeterSenior Investment and Markets Analyst, Hargreaves Lansdown
Tips To Know Before Investing In Cryptocurrency
Here are a couple of important things you should know before investing in cryptocurrency.
Capital Gains Tax: For tax purposes, cryptocurrency is considered an asset, like a stock or property. When you sell crypto and make a profit, youll have to pay capital gains tax on what you earned. Keep this in mind when youre budgeting for the year and planning for taxes.
Short-Term Investing: Because cryptocurrency is a volatile asset, many investors would consider it to be a short-term investment rather than a long-term one. Its possible that in the future, cryptocurrency may become a stable investment and that long-term holdings will yield significant profit. But thats a big if. Since cryptocurrency values have been decreasing, you might have a better chance of making a profit by timing the market. Thats incredibly risky, but crypto is high-risk. If you want your money to appreciate over a long period, youre better off investing in long-term bonds, index funds, or IRAs.
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Think About The Value That The Project Is Bringing In
Check to see whether the project is bringing in any practical utility into the ecosystem. The perfect example of this is Ethereum. There is a reason why it took off so fast for the first time, developers around the world had a platform that they could use to build their own dapps or decentralized applications on a blockchain.
Along with that, keep in mind the issues that the crypto world is desperately looking to solve privacy, scalability, and interoperability. A good way to go about your investment is to find the projects that are specifically working on solving these problems.
As of 2021, the players trying to solve these same problems and roll them all into their platform, or Layer 1 network include:
Each token role has its own purpose, as outlined below:
- Right: the token holder gets a certain amount of rights within the ecosystem, such as the right to vote.
- Value exchange: the token helps buyers and sellers trade value within the ecosystem.
- Toll: the token acts as a toll gateway in order for the holder to use certain functionalities of the system.
- Function: the token enables the holder to enrich the user experience inside the confines of the environment.
- Currency: the token stores value that can be used to conduct transactions both inside and outside the ecosystem.
- Earnings: the token provides an equitable distribution of profits or other related financial benefits among investors.
So, how does this all help with evaluating token utility?
How Do You Store Your Cryptocurrency
Hang with us, were about to get pretty techy here. You store your cryptocurrency in something called a digital walletusually in an app or through the vendor where you purchase your coins. Your wallet gives you a private keya unique code that you enter in order to digitally sign off on purchases. Its mathematical proof that the exchange was legit.
With us so far? Okay, good. Because were about to get into the tech weeds even more.
Cryptocurrencies use something called blockchain technology. A blockchain is like a really long receipt that keeps growing with each exchange of crypto. Its a public record of all of the transactions that have ever happened in a given cryptocurrency. Yes, it sounds like its straight out of The Matrix. Just think of it like a ledger that shows the history of that piece of currency.
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A Brief History Of Dogecoin
Dogecoin is considered to be the first meme coin, and while it was initially designed to poke fun at the wild speculation that thrives in cryptocurrency markets, a community all its own quickly developed around it. Crypto enthusiasts saw Dogecoin as a way for new investors to learn about and experiment with the technology without having to worry about the higher stakes that came with Bitcoin, which, at the time, had just broken $1,000 per coin.
As a result, Dogecoin was promoted as a “fun and friendly internet currency.” Compared to the Bitcoin community, the Dogecoin community was less concerned about the cryptocurrency’s price and more interested in seeing the coin utilized in the use cases being touted as key for cryptocurrency broadly.
For instance, a number of Dogecoin-tipping bots launched on social media platforms, which allowed people to send small amounts of it to someone if they liked their post. The community also used Dogecoins to fundraise for several worthy causes, including helping Charity: Water build a well in Kenya and sending the Jamaican Bobsled Team to the Sochi Olympics when they qualified but were unable to afford the trip.
How Do You Buy Bitcoin And Hold Cyrptocurrency
Like paper money, you hold bitcoin in a wallet. In this case, it is a digital wallet. And wallet is a misnomer the wallet doesnt secure your bitcoin, but, rather, storing your keysdigital code that is required to unlock your bitcoin investment. No one, not even you, can access your bitcoin without your keys.
You can hold your bitcoin in a hot wallet or a cold wallet. Hot wallets are digital wallets stored online, whereas cold storage or cold wallets are most often physical hardware devices. As you might guess, cold storage is the gold standard for securing bitcoin keys money held in a hot wallet might be as secure as a physical leather walletit could be stolen.
A cold wallet, which costs upwards of $150, offers physical bitcoin storage and is more secure, like a vault at a bank. Technically, your cold storage cannot be hacked as it is not accessible online. Think of it like a vault at the bank. Of course, you would have to take great care to ensure that you understand the technology and processes for storing your personal keys in a cold wallet.
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Buying And Storing Crypto
You can buy or sell crypto on a crypto trading platform using traditional money. Crypto is kept in a unique digital wallet or hardware wallet.
A users wallet has a set of private keys that are used to authorise outgoing transactions on the blockchain network. A wallet may be a software or hardware wallet. A hardware wallet stores these private keys on a secure hardware device not connected to the internet. This can protect the users wallet from hackers.
Scam alert: an increased number of Australians have reported losing money through crypto-asset or cryptocurrency scams.
Why Crypto Is So Volatile
Crypto is worth what people are willing to pay for it.
This means that the price of crypto-assets can fluctuate at extreme levels based solely on market speculation. Factors that can influence the price of crypto include:
- media focus
- public announcements
- the actions of individuals who hold large amounts of a crypto or who influence the price through social media
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Best Crypto Exchanges And Investing Platforms
Here is our list of the 10 best cryptocurrency exchanges and investing or trading platforms. The cyrpto offers that appear on this site are from companies from which The College Investor receives compensation. This compensation may impact how and where products appear on this site . The College Investor does not include all cryptocurrency exchanges or all crypto offers available in the marketplace.
Things To Know Before You Invest In Cryptocurrency
Before one invests, there is a due diligence checklist.
Cryptocurrency has been adopted by the mainstream in recent years. Not a day goes by without some headline-making metaverse purchase or cryptic tweet on dogecoin . Hype aside, the crypto market is no fad. 300 million worldwide users see its long-term potential and an increasing number of global giants now accommodate it as a payment method. Yet, the crypto world is still a nascent market that attracts promoters, scammers and dreamers. Ergo, despite this growth and exuberance, the decision to buy crypto is not one to take lightly. Due to their speculative nature, blockchain-derived investments are inherently volatile and unpredictable.
Before you jump onto the cryptocurrency bandwagon, its crucial to do your research, just as you would with any other investment, to eliminate fraudsters and safeguard against the inherent risks and possible surprises. Here are the five things you should ask yourself before you invest in cryptocurrency.
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How Do I Exit And Can I Afford To Lose Everything
Investing in crypto and waking up a multi-millionaire is an enticing notion. However, its also an incredibly illusory one. Far from conventional stock-market investments, investing in crypto is arguably a game of speculation. Unfortunately, for every overnight win, there are many overnight losses. Since this type of investment is often based on sentiment and perceived scarcity, its outcome is unpredictable. As such, just like any other gamble, you should only put in what youre willing to lose.
Once you know how to enter the market, its just as crucial to know how to exit it. The main exit is selling into the market, and then cashing out into a stable coin that tracks fiat currency or converting into fiat currency and withdrawing the funds into your bank account. Many speculators buy Bitcoin or other crypto coins when they drop and attempt to sell them when they spike.