When Should I Invest In Cryptocurrency

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How Much Should I Invest In Cryptocurrency

Should I Invest In Cryptocurrency?

Though cryptocurrency is new terrain, like any investment, you should only invest what you are willing to lose. You should also ask yourself what you want to get out of your portfolio. Are you seeking large returns on your investments, or simply steady growth over time? Unlike many other assets on the market, cryptocurrency is neither a tangible asset nor does it earn income. Thus, fluctuations are par for the course. When investing in cryptocurrency, expect the unexpected.

Furthermore, when investing in virtual currencies, you need to think of the big picture. Cryptocurrencys sudden rise indicates an uncertain future. While most people hold cryptocurrency for only a few months, a long-term investment of around five years can prove beneficial. Long-term investments provide you with more accurate data of an assets behavior, which is especially invaluable with a newer asset like cryptocurrency. These investments also increase the possibility of your investment stabilizing overtime against fluctuations, and minimizing trading fees. If you jump onto a passing trend, your money might pass with it.

Should I Invest In Cryptocurrency

Listen, you can try your hand at cryptocurrency if you want to. If you have some money youre willing to lose, money that you might have thrown away on a roulette wheel in Vegas instead, knock yourself out. Were not going to be mad at you for that. But we want you guys to win with money and secure your retirement futureand there is just no evidence that cryptocurrency is going to do that for you.

Plain and simpleinvesting in cryptocurrency is not a good way to build wealth for your future. Now, were not saying that cryptocurrency is going to go away. And were not saying it’s horrible. But we are saying that crypto doesnt have a proven track record of building wealth.

If you really want to invest in something with a solid track record, heres the better plan: If youre out of debt, have an emergency fund that will cover three to six months of expenses, and youre ready to invest, then focus on investing 15% of your income in growth stock mutual fundswhich are way more secure than crypto.

Dont give in to a craze just because theres a lot of hype. Weve talked to people who have taken out a mortgage or cashed out their entire 401 early to invest in cryptocurrencyheck no! Dont put it all on the line and risk your financial future, your retirement dreams and your familys well-being. If you cant afford to lose the money, dont invest it in something as unstable as crypto.

A Better Way To Invest

Bottom line? The road to building wealth is slow and steady, and there are still way too many unknowns when it comes to cryptocurrency. Could crypto become a more legit way to invest later on down the road? Sure. But as things stand today, just say no.

Get-rich-quick schemes are just thatschemes. Dont risk it and pour all your hopes, dreams and money into them. Instead, sit down with a SmartVestor who knows what theyre doing. Let them walk you through a solid strategy for investing that doesnt involve trying to build wealth through risky investments like crypto. And dont knock that 401, folks. Its the number 1 wealth-building tool of millionaires!

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.Learn More.

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Cryptocurrency Is Still A Volatile High

Cryptocurrencies are very volatile. Bitcoin is a prime example, as its not uncommon for it to drop 30% one week and then skyrocket to record highs the next.

Bitcoin might be doing really well compared to when it first gained popularity, but the returns are neither stable nor guaranteed. For example, anyone who bought BTC in late 2021 is sitting on a major loss today.

If you do buy crypto, we recommend only allocating a small portion of your portfolio to it to start.

Why You Can Trust Bankrate

What Cryptocurrency Should I Invest In 2020 If I Have 200 Dollars

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our investing reporters and editors focus on the points consumers care about most how to get started, the best brokers, types of investment accounts, how to choose investments and more so you can feel confident when investing your money.

Investing disclosure:

The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal.

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Why Is Bitcoin Rising

Although the driving forces behind Bitcoin’s recent price appreciation are not totally clear, the media has attributed the increase to the following:

  • The market is seeking Bitcoin as an inflation hedge. Unlike many major global currencies , Bitcoin has a fixed supply of 21 million units.
  • Large digital payment companies like Paypal, Venmo and Square are now accepting bitcoin as a form of payment or exchange on their platforms.
  • Several companies, including Tesla and data analytics firm Micro Strategy, have announced large purchases of bitcoin. They have also announced they will start accepting Bitcoin for payment.

Is It A Good Idea To Invest In Cryptocurrency

If you invest incryptocurrency, do it based on the facts, not the hype and there is a lot of hype.

Before you buy and sell digital currency, know the risks so you can judge if investing in it is a good idea for you and your personal finances. Here, we help you understand how cryptocurrency works.

The Bank of England would not agree that it is a good investment. Governor Andrew Bailey warned that people who invest should be prepared to lose all of their savings.

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How Can I Invest In Bitcoin

You can invest in Bitcoin directly by using one of the major cryptocurrency exchanges, such as Coinbase or Binance. Another way to gain investment exposure to Bitcoin is to buy shares in a company with significant Bitcoin exposure, such as a Bitcoin mining company. A third option is to invest in a Bitcoin-focused fund such as an exchange-traded fund .

How Do I Start Investing In Cryptocurrency

The Game of #Bitcoin? Should I Invest in #CryptoCurrency or Not? | Financial Education

If you’re considering buying crypto now, as prices have dipped, it’s worth noting that there’s no guarantee the market will recover. But the simplest way to get your feet wet with crypto investments is to use US dollars to buy a cryptocurrency using a popular exchange like Coinbase, Binance or FTX. A handful of well-known payment apps including Venmo, PayPal and Cash App will let you buy and sell cryptocurrency, though they generally have limited functionality and higher fees.

Whether you’re using Coinbase, Binance, Venmo or PayPal, you’ll be required to provide some sensitive personal and financial information… including an official form of identification.

Once your account is set up, it’s simple to transfer money into it from your bank. And the barrier to entry is quite low: The minimum trade amount is $2 on Coinbase and $15 on Binance.

Read more: Best Bitcoin and Crypto Wallets for 2022

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Cryptocurrencies: How Are They Made

For real money, central banks either print bills or mint coins. In the case of cryptocurrencies, computer code is used to construct them. The creation of new coins is governed by the currencys code. There are more than 6500 cryptocurrencies in existence worldwide, and anyone can theoretically use blockchain to create their own money.

A procedure known as mining is associated with the production of new coins, and it only takes place after transactions have been validated. The network computers are required to do tiny algorithmic tasks in order to be compensated with the proper quantity of money. Of course, this is not as simple and lucrative for the average person as it may seem. For instance, it is estimated that just powering Bitcoin farms uses 0.21% of the total electricity produced worldwide.

Depending on the cryptocurrencys programming, other processes to generate new coins also include paying its developers with more coins for a variety of tasks done or even rewarding more coins as interest on its current holdings. Though mining is the most popular method of creating new currencies.

Cryptocurrency Is Too Speculative

Unlike stocks, bonds, and real estate, cryptocurrencies produce nothing. No earnings, no interest, no rents. I don’t invest in any speculative assets . If the only way for me to make money on something is to sell it to someone willing to pay more for it, I’m not buying it with serious money. I just don’t invest that way. Yes, every investment has some element of speculation in it, but if that is the primary element, I’m not interested.

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What Are The Risks Of Cryptocurrency Investments

Cryptocurrency is a highly volatile investment wherein you might make high returns but risk losing everything. In addition to this, there is an increase in cryptocurrency scams and fraud, leading to an even more significant loss.

Many firms might promise investors a high return from investing in cryptocurrency while such risks are minimized. This is an exaggerated promise of high returns, which, most of the time, returns void.

Currently, there are little to no regulations in the cryptocurrency industry, which creates a domino effect of problems, including more competition, that is not regulated in blockchain projects. There is the potential that if regulated by government officials, that cryptocurrency might be seen as a threat and not innovative technology.

Lastly, the cutting-edge technology used in cryptocurrency development and sales can pose a risk for investors as much of the technology is still being developed and has not yet been extensively proven within real-world situations. The threat of regulation is the single largest risk facing many cryptocurrencies.

This is why the founders of the Bitcode Method suggest that many security protocols on different trading platforms should be analyzed and assessed before purchasing cryptocurrency.

Get A Feel For The Industry

Should I Invest in Cryptocurrencies

Its essential for investorsparticularly those who are new to digital currenciesto develop a sense of how the digital currency world works before investing. Take time to learn about the different currencies offered. With hundreds of different coins and tokens available, its crucial to look beyond the biggest names, like Bitcoin, Ether, and Ripple.

In addition, its important to explore blockchain technology to get a sense of how this aspect of the cryptocurrency world works.

If you dont have a computer science or coding background, some aspects of blockchain technology likely will be a challenge for you to parse out. There are many primers on blockchain technology that are written for laypeople.

Once youve identified the cryptocurrency for investment, look into how those tokens make use of blockchain technology and whether they provide any innovations that differentiate them from the rest. By better understanding cryptocurrencies and blockchain technology, youll be more fully equipped to determine whether a potential investment opportunity is worthwhile.

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Is It Too Late For Crypto

No. It is rather early for crypto. Imagine this. There was a time in Web2 when you were struggling to play videos. You would download converters to convert them into a suitable format. Then VLC came along and changed the entire picture, only to eventually move to Netflix, where youd never have to download a video again.

You should ask yourself if we have a Web3 version of Netflix yet. The answer is No! We are super early in the day.

Is Cryptocurrency A Good Investment Checklist

  • Cryptocurrency investors should do their due diligence, as they would with any other investment
  • Think long and hard about which cryptocurrency has the genuine potential to change the world
  • Try not to be swayed by malicious money-grabbers shouting this or that coin is going to the moon
  • Remember there is nothing quite like losing a months wages in a day to bring an investor right back down to earth

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Remember The Past Is Past

A mistake that many new investors make is looking at the past and extrapolating that to the future. Yes, Bitcoin used to be worth pennies, but now is worth much more. The key question, however, is Will that growth continue into the future, even if its not at quite that meteoric rate?

Investors look to the future, not to what an asset has done in the past. What will drive future returns? Traders buying a cryptocurrency today need tomorrows gains, not yesterdays.

Can Bitcoin Be Used As A Hedge Against Inflation

Cryptocurrency Explained | Should YOU Invest in Cryptocurrency 2021? Bitcoin Ethereum Dogecoin

Because the value of Bitcoin is currently not tied to the value of a basket of goods or services, its value as an inflation hedge is a matter of speculation and is unpredictable. Throughout much of 2021 and 2022, Bitcoin experienced both sharp rallies and sharp price declines even though inflation data consistently ticked higher. Whether Bitcoin will prove to be an effective inflation hedge in the long run is yet to be determined.

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Understand Your Risk Tolerance

Cryptocurrencies, including Ethereum, are difficult to value because they don’t generate revenue or profit like regular companies do, so knowing the best times to buy or sell can be tricky. This means that it’s probably a good idea to closely observe changes in asset prices and be ready to take advantage during times of market weakness, like right now.

Purchasing Ethereum today, when its price is 74% off its all-time high, could prove to be a winning investment over the long term. But it’s wise to only invest money that you’re willing to lose, as digital assets are still extremely speculative financial instruments. Plus, investors will have to deal with a ton of volatility.

If you accept these conditions and you’ve figured out how much risk you can take, it’s time to buy Ethereum on the dip. It might just end up being your best investment over the next five to 10 years.

Neil Patel has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.

What Is Volatility

Investors diversify portfolios in several ways, from incorporating different asset classes to incorporating different subcategories within an asset class. While the methods may differ, the object is the same: to manage volatility and create stability. Volatility is a measure of the amount of returns an investment makes over time that can be found by way of statistics like standard deviation, the amount something deviates from its mean. This characterizes the unpredictability of an asset class the higher the volatility, the higher the risk and return, and vice versa. A well-balanced portfolio assesses its volatility and incorporates investments that lower the standard deviation of a portfolio.

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How To Pick A Cryptocurrency To Invest In

Trusted Bitcoin Investment Sites

Before you go ahead and buy some coins or tokens just because somebody says its a good investment, it will pay to do some research.

First of all, its important to understand that picking a good cryptocurrency is not like picking a good stock. A stock represents ownership in a company that creates profits for its shareholders, or at least has the potential to do so. Owning a cryptocurrency represents ownership in a digital asset with zero intrinsic value.

What makes a cryptocurrency increase or decrease in price is simple supply and demand. If theres increased demand and a limited supply increase, the price goes up. If supply becomes constrained, price goes up, and vice versa. So, when evaluating a cryptocurrency, the most important questions to answer are how the supply increases, and what will drive demand for the coin higher.

You can answer those questions by reading the white paper that a cryptocurrency team publishes to attract interest in their project. Look at the roadmap for a project and see if anything could spark an increase in demand. Research the team behind a project and see if they have the skills to execute their vision. Try to find a community of people already investing in the cryptocurrency and gauge their sentiment.

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