Everyone around us these days talks about how bitcoin offers fantastic investment opportunities. But, every other day, we hear about multiple frauds concerning bitcoins. Besides bitcoin, You can look for different other virtual currencies for investment. With the rise in value and the demand for bitcoin, more people are investing. Cryptocurrency investment is at an all-time high. Many people choose crypto investment to diversify their investment portfolios.
Currently, the value of bitcoin stands at a staggering high of $45000. The value has increased by almost 380% compared to last year. In addition, the value and price of other cryptocurrencies like Ethereum and Dogecoin have also increased over the years. As per experts, crypto offers a lucrative investment opportunity. But we can’t conclude that anyone or everyone can invest in it. Since crypto comes up with high levels of volatility, it is not a great investment option for many. If you are sure about taking the plunge into the crypto market, this article will help you with decision making:
Following are some of the signs that reveal whether you are ready or not for the bitcoin investment:
The level of risk tolerance
Everyone knows that all types of cryptos come with high risk. The main risk behind this is volatility. If you want to compare, bitcoin loses more than 80% of the value within a few months. Within a week, it loses and gains value by 20%. No doubt, it makes a recovery soon after a significant dip. But not everyone will be ready to tolerate the volatility level.
You also need to know that all crypto investment has some levels of speculation. Thus, bitcoin or crypto investment has an uncharted risk. Nobody knows whether you will make money or lose all your money. So, before making this life-altering decking, try to know your risk-tolerance capability.
No one says that crypto is a bad investment. But it is undoubtedly a risky investment. Thus, if you are ready to go on a roller coaster ride of volatility, crypto is not a bad option.
Check your emergency fund.
Now that you are aware of the level of risk in bitcoin investment try to get an idea about your emergency fund. Crypto investment is risky. Thus, it is essential to have an emergency fund ready before you plan to invest.
If you are not prepared with an emergency fund and face any unexpected expense, you may have to sell your cryptos. Depending upon the situation, you will hit rock bottom. To avoid these dreadful situations, try to maintain an emergency fund for six months. This way, you will be in a situation to tackle all situations with ease.
No matter which models you choose, portfolio diversification is essential. But the situation becomes more intense when it comes to crypto investment. When your crypto investment takes a u-turn, you need to have a strong portfolio as a backup. Thus, try to invest in index funds and ETFs for portfolio diversification. This way, you will get exposure to many stocks and shares across different sectors and industries.
Try to have a strong core portfolio that can offer you a backup at the time of loss. Keep stable stocks in your core portfolio.
Do your homework
Most newbie investors don't understand the difference between different cryptocurrencies. Thus, before you plan to invest in bitcoin or other currencies, try to do proper research. No doubt, Bitcoin is the most popular cryptocurrency. But there are many currencies in the market. Thus, you won’t have a shortage of choices. Before you invest in any currency:
- Try to ask why you are considering a particular currency.
- Be informed about the long term prospects of the currency.
- Try to have a wholesome approach to each investment you make.
Investing in crypto is not an easy decision to make. You need to take on different aspects involved. Moreover, not everyone has the knowledge and risk-taking abilities. Thus, try to gather a large chunk of information about this. We will be available to your rescue if you face any confusion in your investment. You can find additional information on how to maximize your bitcoin trading here.