Cryptocurrency – an investment for risk or a reliable tool?
Cryptocurrency – investment at risk or a reliable tool?
A lot of people are talking about cryptocurrencies now. This is a very loud topic. Some consider this a very risky investment while others consider it a great investment option. The truth lies somewhere in the middle. Let’s find out!
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Why is it worth choosing a cryptocurrency to invest?
There are many different cryptocurrencies in the financial market. And each year their number only grows. And all because digital money arouses great interest not only among large investors, but also among ordinary people.
Both the former and the latter invest in a rapidly growing segment of the market in the hope of achieving a good profit.
According to experts, the cost of cryptocurrencies will continue to grow. Based on the observations of the cryptocurrency market from the last decade, it is clear that with a temporary drop in prices, short-term investments do not pay off at all, but long-term investments bring huge benefits for a year and more and are very rarely empty. . In other words, with the right approach, investing in cryptocurrency can generate good returns.
The popularity of cryptocurrencies
According to the assessment prepared by the Triple A payment platform, the total number of cryptocurrency holders around the world has already exceeded 100 million, or about 3.9% of the world’s population. Most of the world’s cryptocurrency holders live in Ukraine – over 5.5 million people or 12.73% of the entire population.
In terms of the percentage of the population owning digital assets, Ukraine is ahead of all countries this year. The second place in the ranking was taken by Russia, which is home to 17.3 million cryptocurrency holders, or 11.91% of the entire population.
Venezuela is next – 2.9 million and 10.34%, Kenya – 4.5 million and 8.52%, and the United States – 27.4 million and 8.31%, respectively.
Cryptocurrency is a highly speculative instrument
It is premature to consider cryptocurrencies a fully fledged financial tool for the safe investing of civic funds. Cryptocurrency is still a highly speculative instrument with very high volatility, its movements can absorb up to 15-20% of an investor’s investment in such a risky and highly volatile instrument in one day.
You should only take risks if you want to tolerate large fluctuations in your portfolio. In other words, if you consider cryptocurrencies to be an investment vehicle and want to “sit in cryptocurrencies” for many years, your investments must be made without leverage, knowing that this will be the case for years. You must also accept that any pickup that takes place along the way will require a seat.
For example, you are investing in Bitcoin. The price was $ 60,000 in the beginning, then it dropped to $ 25,000 and you lose more than half of your wallet. So if you have a long term investment and understand that your goal is more important, say 100,000, 200,000 or $ 300,000 at the price of Bitcoin alone, you need to sit calmly over these losses.
You have to understand that you have taken that risk with this tool. If you do not have such preparation, you should understand that during such extreme movements, you can gradually lose your entire deposit and close negative trades.
How to invest in cryptocurrency so as not to lose all your money?
It is important to understand that the probability of losing your entire cryptocurrency investment portfolio is very high. You have to be very careful with your cryptocurrency investments.
To minimize the risk of investing in cryptocurrencies, you should divide your capital into three portfolios:
1) safe – investments in very stable, reliable assets;
2) medium risk – investments in listed companies, in highly credible projects with a clear liquidation value;
3) risky – speculative investments with high risk and the opportunity to earn a lot of money.
I recommend considering cryptocurrency as an investment tool only for a very small percentage of your investment portfolio. Invest some money that you want to risk or even lose. You need to have specific investment goals that are detailed so that you don’t have to worry if the market suddenly turns against you.
Because there are very strong fluctuations and very high volatility in the cryptocurrency market. Be prepared for the fact that there will definitely be significant drops in a few years as cryptocurrency is very volatile and regularly shows days where the market drops by 20% and 30%. Therefore, you should be very careful and consider this instrument as a high-risk instrument.
In conclusion, I would like to point out once again that no one can give a guaranteed forecast of the stability of the cryptocurrency market. Because it is characterized by spontaneity and lack of regulation.
Therefore, before investing in digital money, it is worth getting acquainted with cryptocurrency exchanges. The cryptocurrency market is volatile, so you should be prepared for sharp fluctuations in cryptocurrency prices. To reduce risk, diversify your investments – divide your capital into three portfolios.
For example, you shouldn’t invest all of your money in a cryptocurrency just because you know its name. It’s a big risk. You need to invest carefully, not chase money.