Should I Invest in Crypto?

Cryptocurrency is quickly becoming one of the most popular investments in the country. Think we’re kidding? Believe it or not, around 21% of US adults have owned cryptocurrency at some point now, clearly demonstrating the growing reach of the market.

While tales of overnight millionaires and disgraced owners losing billions overnight stake their claims in headlines, there are countless investors still making a killing in the market.

So, should I invest in crypto in light of recent events? We’re glad you asked! Read on to find out.

What Is Crypto?

A cryptocurrency is a form of digital currency in which transactions are recorded by decentralized cryptography rather than a centralized authority like a national bank (Federal Reserve, Bank of England, etc.). You’ve undoubtedly heard about crypto in some form, but you may still have questions about what exactly it is.

In technical terms, cryptocurrency is a series of code that forms a “blockchain”. This is a strong and relatively new form of encryption, giving it the name crypto.

The first use of this open-source software began in 2009 but didn’t become popularized until around 2016. In 2009, the introduction of Bitcoin, the first major cryptocurrency, was valued at just $0. Today, it is worth over $18,000 USD and once peaked at $64,400 per Bitcoin.

Moreover, the level of encryption and high potential returns has made cryptocurrencies one of the most profitable investments in market history. Is that still the case?

Is Crypto Still a Good Investment?

This question is open to interpretation. One person’s idea of a “good investment” differs from another’s. However, there are plenty of positives to investing in cryptocurrency.

For many investors, this makes crypto a great investment opportunity. Here are a few examples of the benefits.

Security

First, cryptocurrency is incredibly secure, especially compared to other digital assets. The high levels of encryption make crypto investments incredibly secure and accessible to users.

However, we should note that there are many trading platforms, and we certainly cannot speak for all of them. Make sure you use a trusted platform before investing. More on that later.

Still, there is also a lot of privacy involved in crypto trading, which is great for investors. Nobody has to know how much money you’re making unless you want them to. While this is a point of contention for the IRS, it’s good news for investors!

Taking Advantage of the Recent Crypto Crash

When the stock market crashed in the early months of the Covid-19 pandemic, many seasoned investors panicked and bailed. However, some savvy investors, many of whom had not invested in stocks before, saw an opportunity. They knew that these stocks would have to bounce back at some point.

Well, the same logic applies to the Crypto market. Yes, there are differences compared to stocks, but not at the fundamental level.

Therefore, the recent crash including FTX poses an opportunity. Giant conglomerates lost 70% or more of value during the Covid-19 crash, and many cryptocurrencies are seeing the same losses. This is called “buying the dip”.

While there’s no such thing as a perfectly safe investment, it’s a pretty safe bet at this point that crypto is here to stay. If that’s the case, then you can bet that now is the right time to invest in the wake of the recent crash. Results may not come overnight, but if you have money to hold for a while, then why not?

Protection From Inflation

Inflation has been on the minds of many over the last year or so. Unfortunately, the problem is still here, and the Federal Reserve (and other central banks) are still raising interest rates to fight it.

One of the best ways to protect your assets from inflation is to enter a market like cryptocurrency. Stocks are widely speculative and subject to major changes due to the macro economy, whereas crypto is a little different.

For example, Amazon has lost more than half of its value in the last year due to economic conditions entirely out of the company’s control. They’ve had to cut jobs, defund certain programs, and make some difficult business decisions. The market then responded by selling off.

Conversely, cryptocurrency simply isn’t affected in the same way as a corporation. For example, Bitcoin was rated the highest-returning asset of the last decade with an average annual return of 1,576%.

While that’s largely due to the infancy of the crypto market, it’s still well above the 2% inflation cap that the Fed has set. In stocks, the average is a mere 6% annual return.

Low Transaction Costs

Trading cryptocurrency is cheaper than trading stocks on average. A wire transfer from your stock-trading account could cost $10 to $30 for each transaction. Costs tend to be much lower for crypto, whether online or using a crypto ATM.

Diversification

Finally, if you’re already investing money in other assets, crypto is a great way to diversify and protect yourself from economic changes. In today’s uncertain times, diversification is the key to security.

This is especially true if you currently invest in tangible assets like precious metals or real estate. Diversifying into crypto will help spread your eggs into opposing baskets, not just multiple ones.

What to Know Before Investing in Crypto

There are clearly plenty of benefits to investing in cryptocurrency. Here’s what you need to know before getting started.

There Are Plenty of Platforms to Choose From

If you try a platform and don’t like it, try another. There are popular platforms that allow for crypto trading, and you may already have some! Even large financial institutions have embraced crypto trading, allowing you to trade on your mobile app for Venmo, PayPal, Chase bank, and others.

However, there are more platforms that offer more diverse options for crypto investors. These will require a lot of information from you to get in, but it’s well worth it if you want to start investing in some of the lesser-known crypto markets. This information is entirely for security purposes.

You Can Liquidate at Any Time

If you want real cash, you can have it. Bitcoin ATMs are popping up everywhere, and many platforms allow for instant transfers of your liquidated funds.

Moreover, these ATMs are also incredibly secure, as they were designed specifically for crypto transactions. This is especially true when compared to using a personal device on an unsecured network to carry out transactions.

Now, if you’re unfamiliar with Bitcoin ATMs, go here to learn more. You can buy or sell Bitcoin in person and in real-time from your local convenience store, bank, or other locations just like you would with a normal ATM.

There Are Risks Involved

Of course, if you found an investment that carries no risks, you’d have to keep it a secret. Otherwise, everybody would be doing it. Therefore, it’s important to note the risks associated with crypto investments.

First, encryption is only as powerful as you make it. Essentially, it’s virtually impossible to break through the security on the cryptocurrency side. However, a compromised password, ATM pin, or weak personal security is fairly easy to manipulate.

You may have heard of some of these giant crypto heists. Some were caught trying to launder as much as $4.5 billion in stolen crypto in 2022. Still, you don’t hear much about smaller-scale crypto theft, so make sure you protect your accounts.

Second, while decentralization comes with some benefits, it also carries risks. There is less regulation and room for regulation in a decentralized system like crypto. Again, this comes with some substantial advantages, but also some risks, especially for newer and more vulnerable cryptocurrencies.

Lastly, it is quite speculative. Elon Musk mentioning DogeCoin in an interview made its market cap higher than that of Ford Motors, and then the currency dipped substantially. This can create volatility, especially in newer crypto markets.

How to Invest in Crypto

So, you know the benefits, you know the risks, and you want to get started. Well, great.

While crypto is still quite new, it has shown very promising results for many investors. Here’s what you need to know to get started.

Get on the Right Platform

The platform you choose makes a world of difference to your crypto trading experiences. Every trading platform is different, and you may have different trading needs. Make sure you do your research on:

Which cryptocurrencies you’d like to purchase
Fees you are willing to pay
Intended frequency of your transactions
How you would like to trade (online, crypto ATM, etc.)

Once you have made these important decisions, you can find the right platform for your goals. Some are better for short-term trades, some have a wider variety of options, and some have particular features you may find useful. Check out some of the best trading platforms to choose from!

Determine Your Funding

How much money do you have to invest? If you plan on investing in riskier (newer) currencies, then don’t spend any money that you can’t afford to lose.

Moreover, if you’re spending your money on Bitcoin or another time-tested cryptocurrency, it’s less likely that your investment will vanish. Still, determine your maximum investment amount ahead of time, and keep some money in your reserves to avoid pulling out if the market dips temporarily.

Start Small

You don’t have to invest all of your money right away. Instead, you can start small and get a feel for it. Alternatively, you can practice trading without money!

For example, if you see that one currency is trading at $909.63, write that down with the date and time. Keep track of it as if you had purchased it, and try to develop a feel for how the market moves. This is a great way to test the waters.

However, the current dip won’t last forever. We recommend trying to learn how the market works as quickly as possible. It has some key differences from the stock market, so try to learn the ropes as soon as possible.

Pay Close Attention

We would typically suggest you not simply “go with the crowd” in most investments. In crypto, which is highly speculative, you do want to pay close attention to what others are doing. This will have a direct impact on your investment.

When people are buying, the price increases. When people are selling, it decreases.

Therefore, understanding where other crypto investors are focusing can help you make informed decisions. Remember, this has a direct effect on the price of a cryptocurrency.

On the other hand, you don’t want to pay too much attention to hype. It’s good to know what others are doing so you can make informed decisions, but don’t base your decisions on hype. Yes, there have been successes like Dogecoin, but even that had a fall relatively soon after its ascent!

Moreover, you should continue reading about the crypto market throughout your investment, much like you’re doing right now. Reading the news will help you prepare for economic changes in advance instead of being left behind.