The cryptocurrency market is an extremely volatile one, meaning it does not follow or stay in line with the traditional market. Volatile means that the value can have extreme ups and downs. For example, Bitcoin’s value ranged between $900 and $20,000 in 2017.
Likewise, there is a lot of mystery around cryptocurrency. No one knows who founded Bitcoin, for one, and the majority of individuals are confused about how cryptocurrency works exactly. Keep reading to learn more about cryptocurrency, including some things to keep in mind going forward.
If you do not understand what you are investing in, it can feel a lot like a gamble. A general rule of thumb is to only put your money into something you can explain to a fifth grader. This way, you can keep an eye in the news and may be better able to stay ahead of market drops.
When you use an investing app, like SoFi or Robinhood, you will notice that you will have two accounts if you put money into traditional stocks and cryptocurrency. Even the best cryptocurrency to invest in does not have a proven rate of return. Not only are they relatively new, but they also are not tied to any regulatory standards.
On the other hand, your savings account will provide a guaranteed, although low, rate of return, typically less than one percent. Stock market investments typically have a 10 to 12 percent return on investment.
Here are some tips to keep in mind for investing in cryptocurrency:
- Do your due diligence: Look up information on any stock or cryptocurrency before throwing money at it. If you don’t quite understand it, it may be a good idea to sit that one out.
- Diversify: Rather than putting all your financial eggs in one basket, invest a little in different coins. That way, you will not lose all of your money if one tanks.
- Listen to experts: There are tons of advisors, in person and online, who are professionals when it comes to investments. When doing your research, it may be beneficial to speak with an investment specialist.
- Expect the unexpected: Because cryptocurrency is so volatile, there are no guarantees. Your coin’s value could be on the rise for a month straight before completely dropping.
Finally, you should not invest money you cannot afford to lose. While you may want to put your money into a currency that could potentially make you rich, you probably don’t want to go broke in doing so.
