Cryptocurrency is now mainstream. Hardly anyone outside of their circles understood why tech-savvy investors were excited by the launch of the first cryptocurrency, Bitcoin, in 2009. Now, more than a decade later, the rest of the world has caught up with the hype, and some of the people who have heard about cryptocurrencies before but paid it no mind are probably regretting that they didn’t take their chance before the price of the most popular crypto coins shot up.
In 2021, for example, a single Bitcoin averaged at around USD 47,273, with a low of USD 28,000 and a high of USD 69,000. Acquiring just a few of these coins back in 2009 and holding on to them would have left one with an opportunity to retire early and secure their financial future.
If you’re thinking of getting into cryptocurrency, now is as good a time as any. Because this investment avenue is more popular than ever, it’s much easier for newcomers to invest, trade, and mine digital currencies. However, before you put your money in cryptocurrencies and sign up for a Monero wallet or other digital wallets to keep your stash of digital coins, you need to ask yourself if you’re fully aware of this commitment.
While the news of the soaring prices of Bitcoin, Etherium, Monero, and other types of cryptocurrencies can be compelling enough for anyone to take the leap, you should be aware that, just like any investment, digital currencies come with their own set of risks. Taking on these risks is part and parcel of investing in crypto.
The question is: are you in a good position to start investing in digital currencies now, or would it be better if you wait until there’s a much more suitable opportunity for you? Answer the following questions to find out.
Have You Done Your Research?
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Cryptocurrencies are just about a decade old and are heavily dependent on digital technology. You need to have a certain level of familiarity with this type of asset, the technology behind it, and how it’s traded to maximize its benefits. At the same time, it’s also important to understand that cryptocurrencies have different qualities. There are those that show much promise at first only to fizzle out after a few weeks or months. Before you buy a coin, you must determine if it has the potential for growth and longevity. Otherwise, you’ll just end up losing your investment.
Do You Have a List of Short- and Long-Term Financial Goals?
Cryptocurrencies are a tool to grow your wealth. While trading this asset, in itself, can be quite exciting, that excitement shouldn’t keep you from pursuing your end goal. Why are you investing in crypto in the first place? Do you have a list of conditions that you should check off before you can say that you’ve reached your goal? What are the situations that would compel you to quit on cryptocurrencies? Deciding on these elements ahead of time will help you make quick, crucial decisions once you need to cross that bridge.
Do You Consider Your Portfolio to Be Sufficiently Diverse?
Cryptocurrencies can be a part of a well-balanced portfolio. If you’re a beginner investor, though, you might want to build a stable portfolio of assets before you get started on crypto. Remember that this asset can be quite volatile, and putting your entire investment in it can spell disaster in case the price of your coins suddenly dips for long periods. It’s a smart idea to put a small portion of your investment in digital currencies if you already have a list of assets that offer a bit more in terms of stability and consistency.
Do You Have an Emergency Fund and a Separate Allocation for Retirement?
If you’re planning to invest your emergency fund or retirement fund in crypto, stop. Again, the asset is highly volatile, and you want your emergency and retirement funds to be in a safe space so that you can count on them when the need arises. It can be difficult to retain your money’s original value or withdraw it for emergency use if you’re using the said funds to support your cryptocurrency investment. If you have to dip into your emergency fund to invest in crypto, then you’re probably not financially ready for this commitment.
Have You Completed Paying Your High-Interest Debts?
Last but not least, you want to be done paying your high-interest debts before you start investing in crypto. Your credit card debt, for example, can have a consistent interest rate of 16%. While you have a chance of earning big by actively trading cryptocurrencies, there’s still a good chance that your debt will increase more consistently compared to the value of your crypto investment. Pay off your debt first, then start putting your funds together for your cryptocurrency stash.
If you answered a resounding “yes” to all these questions, then you’re in a good place to start investing some of your assets in cryptocurrency. Once you have a few coins in your possession, you can simply hold on to them and wait for their value to appreciate, or you can trade more actively and leverage the movement of the market to grow your money.
No matter how you intend to manage your investments, though, keep your eyes on the prize. Focusing on your end goal with your assets will help you make the right decision when faced with the volatility and hefty opportunities presented by cryptocurrencies.