Do You Have Questions About Cryptocurrency? Here Are 5 Answers 

Crypto

If there is something you should know about crypto, it’s that you’re about to get on a roller coaster. Crypto’s values vary drastically, driven by hype, speculation, and even the impulses of CEO Elon Musk, the world’s richest person, Tesla’s and SpaceX’s Chief Executive Officer. He also owns cryptocurrencies, like Bitcoin, Dogecoin, and Ethereum, and he isn’t planning to sell them. He also posted on Twitter about his beliefs on the probable inflation rate in the future. 

Some people may get lucky, while others might get burned when investing. Are you one of those “boring” investors whose purpose is to invest slow and stable capital? That’s years away! But because crypto uses blockchain technology to record transactions, short-term risks might be worth it in the next couple of years, according to financial experts. So, as long as investing in cryptocurrencies isn’t holding you from meeting other elementary financial responsibilities, it’s well worth buying it. 

Still, it would be recommended to elucidate your goals before investing in crypto, or choosing an exchange platform, like Binance, to trade cryptocurrencies. 

Cryptocurrency Basics

There are literally thousands of different crypto coins. As they showed themselves, some are better fit for investors. Cryptocurrencies, like Bitcoin, increase in value much more than others, which remains the primary purpose why it’s best to consider them. However, many financial experts believe that cryptocurrencies come with risks, and not everyone is ready to enroll in this “gambling” game – it’s like buying a lottery rather than investing. 

Cryptocurrencies function on a principle called DeFi, or decentralized finance, which means they’re far from reaching an authority or central government. The lack of legislative oversight appeals to many but comes with threats other people find intolerable. 

1. Don’t Invest More Than You Can Afford to Lose.

Cryptocurrency is risky; there’s no argument about it. Nothing guarantees you’ll become successful overnight. The prices swing wildly every minute. While the market is glowing now, painful drops may occur in the following minutes. And it’s certainly going to happen. You may say: “I thought crypto is money-making!”. It is, but it shouldn’t take a toll on your mental health. You probably heard stories about young adults who borrowed 50k from their parents to invest in crypto, but they end up losing more than half of the investment. Don’t put your life savings in crypto. Most people start reading about crypto online, and the more they read, the more they want to invest, only that they don’t know how much to invest. 

2. Research Thoroughly

Before investing an amount of money in crypto, spend time researching to understand the value and risks of this market. Read as much as you can – there’s valuable information among crypto, but also myths and false data. Be careful what topics you choose. Instead, you could borrow books, prowl on community forums, listen to online podcasts, etc. Anything related to this field will give you an insight into what crypto is, how it may benefit you, and how much you should invest. Also, you may go to local meetings and ask questions. Don’t be afraid to fill your curiosities across the crypto market. Once you think you’ve done enough research, do even more work. It will help you understand precisely where you stand. 

3. FOMO – Fear of Missing Out 

Try to fight the fear of missing out on a particular project. If the only reason you’re investing in cryptocurrencies is that you avoid being the one in the group of people who doesn’t invest in bitcoin, you should stop right there. The only thing you’re going to miss out on is losing everything, and it’s the more accurate way to lose whatever prosperity you’ve accomplished in recent years. Trading doesn’t go like that – you can’t risk everything. 

Instead, know what you’re investing in – really research every inch. Downloading a trading app and watching a currency in the past 24 hours isn’t research. You could be the unlucky one that just bought falling crypto. There are hundreds of coins with shameless promoters, so don’t submit to other people’s pressure. You’re not a teenager who wants to join a group of people to become popular. Allow yourself time to think and measure the case – if an investment is worth it, you’ll know it. And then research more. 

4. Have an Emergency Fund First.

Simply put: Do not invest in crypto if you don’t have an emergency fund settled. How much? Let’s say at least 3 to 6 months of expenses. It’s a great starting point. Put the cash in an accessible savings bank account. However, for unemployed people or if you are in an unstable employment situation, you should increase the number to 9 to 12 months. 

5. Why Do You Want to Invest in Crypto?

Investing in cryptocurrencies is a major financial decision. So, start by measuring your financial situation and what you aim to achieve. Are you looking to invest in Bitcoin or other coins to get rich? With only one Google research, plenty of financial advisors tell you how risky and bad this idea is. If you are away from planning to retire, crypto shouldn’t be involved in your financial goals. Cryptocurrencies are a bit risky right now, as they’re so volatile. 

How much loss can you tolerate? People investing in crypto should have a high-risk tolerance. Many cryptocurrencies drastically rise and fall, something by minutes. So, it’s not guaranteed they won’t break down totally. Make sure you consider how you would feel to know that all your investments are worthless? 

However, the purpose isn’t to be scared away from investing in crypto and potentially transform your financial life, but to ensure you have your eyes wide open. Be careful out there, and consider all the risk, regulatory, data security, and tax deliberations that may arise when dealing with cryptocurrency. Hopefully, this article outlined the answers to your questions about cryptocurrency.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.