Cryptocurrency

Cryptocurrency is the new emerging investment avenue that has attracted many crypto investors. ‘Volatility’ is a natural substance that exists in all investment sources. Even stock investments and shares are volatile. Unfortunately, the cryptocurrency market is a bit different from theirs. The digital currency value is very unstable. Hundreds of cryptocurrencies are entering the digital currency space every day, while the equal number is disappearing like dust. Therefore, the debate on whether cryptocurrency should be accepted as an asset or not still goes unanswered. 

There are over 4,000 different cryptocurrencies in the market today. Many of them offer a decentralized mode of operation while connecting the currencies through blockchain technology. But not everything is Bitcoin or Ethereum. Although the digital currency market has produced a new batch of millionaires if not billionaires, its volatility poses a risk to pull them down at any instance. Some believe that cryptocurrency is suitable for aggressive investors who understand the risk involved with the investment. It is similar to gambling, which may give extremely high returns in a short time, or you could even end up losing the last penny in your pocket. Despite the unanswered questions, finance experts don’t stop investors from investing in the digital currency market. But at the same time, they also suggest the crypto investors to ‘look before leap,’ which means, know the depth of the risk you are taking before falling victim to it. Today, crypto enthusiasts are allocating a part of their funds to invest in cryptocurrencies. They are increasingly considering it as an asset rather than a simple investment.

What should crypto investors consider before investing in a cryptocurrency?

Before investing in a cryptocurrency, the first thing that crypto investors should consider is their stability and regulations. Many invest in crypto trading because of the leniency in regulations. But, one thing that crypto investors should keep in mind is that too many open ends are also dangerous since this involves money. Besides, the cryptocurrency you invest in should have extra features including allowing the users to buy goods and services. Make sure that the cryptocurrency is accepted by companies in exchange for products. However, despite all the innovative features, crypto experts still suggest investors to only buy a cryptocurrency for 1-2% of their liquid portfolio. They cite the digital currency’s volatility as a major reason to not take big risks. 

Especially, in countries like India, where the cryptocurrency is neither legal nor illegal, the crypto investors should wait for the government’s decision. The Indian government is debating on regulating and taxing cryptocurrencies. Therefore, investing without envisioning a future is not a wise decision. When Indians did the same mistake by investing too much in gold loans and microfinancing, it didn’t go well. 

First-time investors can follow a systematic investment plan or SIP to try slow but steady investment in digital currency. The cryptocurrency market might sometimes give the ‘first timer luck.’ But that doesn’t mean anyone could yield big benefits for a long time. Therefore, investing altogether in a single go should be avoided. As mentioned above, rather than taking cryptocurrencies as an asset, individuals should see it as an investment and only allocate 1-2% of their liquid portfolio for it. Borrowing from somebody or taking a loan to invest in cryptocurrency market after hearing the over-night millionaire tales should be kept away.