Cryptocurrency is something that is an attractive prospect for many people. This type of currency is not like other forms of currency such as the United States dollar, Canadian dollar, or the Euro. With it being completely virtual and the potential future of currency, there are some people who want to make an investment.
Cryptocurrency is known for being a risky investment. It is recommended that people should only invest between 5%-30% of their investment capital. Another good rule of thumb is to only invest an amount of money that an investor is okay with completely losing if the market turns.
This is a good rule of thumb, however, there are many different factors that people should consider. People should deeply consider what crypto is, what the trend with cryptocurrency is, how much they minimally have to invest, and what the financial benefits and risks are to cryptocurrency.
What is Cryptocurrency?
Cryptocurrency, also called crypto, is a form of currency that is completely virtual. There are many different facets of this currency that are unique. One of these facets is the fact that the currency is not created or regulated by a bank. This means that it is entirely dependent on the business or the creator of a specific cryptocurrency to produce and regulate how it is made, how much is made, and how much it is worth.
There is a different set of rules that govern cryptocurrencies. People are able to track transactions through a blockchain. A blockchain is an encrypted ledger that tracks all transactions securely. This technology is so advanced that it should remove the chance of counterfeit currency or stealing.
The main reasons why people invest in cryptocurrency are to have varied assets invested in and to invest in blockchains. People who make these kinds of investments might also hope that cryptocurrency becomes a modern currency that is just as accepted as paper money.
Bitcoin, Tether, and some other forms of crypto are meant to be an eventual replacement or additional form of currency that businesses accept. Other cryptocurrencies like Dogecoin and Shiba Inu Coin are more of a collector’s item that’s worth is dependent on trends and trading. Out of the 18,000 different types of cryptocurrencies available, most are intended to address different problems that have come up within the blockchain system. Some of the addressed issues include efficiency, size, and security.
What Have the Trends Been with Crypto Currency Been Previously?
The trends with cryptocurrency are difficult to track but can typically be shown in high rises of value followed by dips. The reason why the cryptocurrency is hard to track is that the market is always available 24/7. This means that the value can increase or decrease much more quickly than other types of stocks. Websites that track the values of each currency in the market often track the daily change in value. These kinds of websites will also track value change in different time intervals such as weekly, monthly, and quarterly.
It might be considered unwise to rely heavily on yearly changes in the value of cryptocurrency because the factors that impact its value are much more fluid than normal types of stock. With normal stocks, there is a consistency in the reasons why the value will increase or decrease. It is easy to predict that stock will be worth more when a business has more business than when it does not.
Cryptocurrency is affected by many different facets that should be considered when looking at the trends of a specific currency. Some of these are easy to predict, such as supply and demand. The harder it is for a company to get or “mine” a kind of currency, the more it will cost.
Other factors that can influence previous trends are the uses of the currency, what kind of properties it has, and how useful it is to consumers. The more a person is able to utilize the coin, the more it will be worth. As time progresses, technology improves and the needs of people change, which changes the value of cryptocurrency.
In the early days of cryptocurrency, specifically in 2008, Bitcoin was worth basically nothing because there were no real-life applications for it and no one wanted to invest in it. Now, as of November 2022, it is worth about $15,000 per unit. People should be aware of how these different factors have impacted a currency previously but should also be even more aware of the current circumstances.
How Much do People Have to Invest in Crypto?
There is no minimum a person needs to have to invest in cryptocurrencies. The nice thing about the system is that there are some similarities to the stock system. The minimum a person needs to invest in cryptocurrencies is however much it costs to purchase a form of cryptocurrency. This can range from a few dollars to several thousand dollars for one unit of cryptocurrency. The type of cryptocurrency that a person invests in should be reasonable for their lifestyle and income.
The biggest thing to consider when considering how much an investor should invest in a crypto is their circumstances and the circumstances of the market. The smartest way to invest is to consider which cryptocurrency (or more) they want to invest in when they should invest, and how much money a person wants to invest.
To begin, financial advisors recommend that people should be aware and goal-oriented when they decide to invest in crypto. People often can fall prey to their emotions and might make rash decisions that cause big losses of opportunity or cash. People who have a clear goal will be much more likely to make the best decisions for them that are informed by the most relevant and important information.
Oftentimes, the safest route for investing in crypto is to put a little bit of money in a variety of places. This can help a person reduce the risk of losing money and have many more opportunities to invest and receive profit.
Another important factor to consider is when a person invests. People should look at and research the trends of the currencies they are most interested in and make a decision from there. One recommendation that experts give is that investors should watch what the leaders in the field are doing. If people who are making a ton of money off of crypto are pulling all of their money out of the market, it would be smart to follow suit.
In some ways, the amount invested is the least important of the factors. For example, in November of 2022, the cryptocurrency market was looking pretty beat up. Most of the top currencies’ values were decreasing anywhere from .01%-26.93% in comparison to three months prior.
However, the cheaper units were increasing in value! Bitcoin, which reached a peak value of around $15,000, was losing nearly a quarter of its value in comparison to August 2022. TWT, which is worth about $3 per unit, has skyrocketed in worth by around 93.21% more than in comparison to August 2022. The person who invested less money would be making more profit in this instance.
Due to the high risk and high reward aspect of this kind of investment, people should be fully prepared that they could lose all their investments when the market shifts. The most responsible, but possibly unreasonable, action an investor can take is to talk to a professional who works with the cryptocurrency market frequently. They will be able to show and explain patterns and trends that are unfamiliar and imperceptible to new investors.
This will enable an investor to use new tools and have a higher likelihood of making a profit. With all of these different factors in mind, investors should be able to find a comfortable amount of money that they are willing to invest in cryptocurrency.
What are the Financial Benefits of Investing in Crypto Currency?
There are a few different benefits to investing in cryptocurrency. One of the biggest and most enticing is the fact that cryptocurrencies have bigger growth potential than other investments. Stocks do increase in worth over time, however, they tend to take months or years to become significantly profitable.
Cryptocurrencies can increase in value overnight! The quick turnaround makes it so investors might reach their financial goals much faster with crypto than they would have with stocks.
Another big benefit is that investors can pick an investment style that works for them and their timeline. Some people enjoy having money in the stock market for long periods of time. Others would rather invest and make a profit fast. Cryptocurrency has a variety of investment options where both types of investors can be satisfied. This type of currency is also not impacted by the normal economic climate. So, if a recession hits or a policy is put in place, investors of cryptocurrency will be safe from losing money quickly.
Some of the biggest benefits of investing in cryptocurrency are the fact that the process is easy and people can change their investments in record times. People are known for switching currencies through trades with other people. This is not normally possible with traditional stocks because businesses run off of money and investors, not off of other businesses’ stock. People can decide they want to invest in a different currency, sell their previous investments, and reinvest in minutes.
Usually, stocks take time to buy and sell. This can be comforting for people who want to have more control over their higher-risk investments. All of these factors can make crypto an appealing investment for many.
What are the Financial Risks of Investing in Crypto Currency?
There are a large number of risks that investors should consider when deciding if and how much to invest in crypto. One of these risks is how easily the system is manipulated by other people and investors. People who invest in crypto run the risk of the worth of the crypto shifting overnight or being incredibly likely to change rapidly due to the economic environment. This doesn’t happen as much with paper currency because banks and nations highly regulate its production. Paper money also tends to have a gold or silver standard that makes its worth more stable.
Cryptocurrency can also be impacted greatly by people who have large amounts of money invested in a particular currency or even the seller deciding to limit or overproduce currency. The worst possible thing that can happen when people invest in cryptocurrencies is that they can get stolen or completely vanish. New currencies in particular are more likely to come from fraudulent or scam businesses. This could make an investment dangerous and risky.
New currencies also tend to be more likely to fall through than established ones. These facts can be especially worrisome for people who invest large amounts of money into a currency. Most people who invest in cryptocurrencies are people that are willing and able to take risks financially due to these factors. Investing in a variety of currencies can help reduce the risk, as each cryptocurrency is unlikely to be impacted simultaneously.
How Much Does the Average Person Make Off of Crypto?
The average person usually can make a 5%-8% profit off of their investment in a few months. This means if someone invests $1,000 into a form of cryptocurrency, they are likely to make an additional $50-$100 off of it. This might not seem like a ton of money, but the turnaround is rather impressive. Most investments take years to increase in value by that much.
Of course, there are exceptions to this statistic. Some people make much more off of their cryptocurrency investments in a shorter period of time. Others will lose all of it. Potential investors should look into different investment strategies and pick the one that fits their lifestyle and comfort zone. Many investors choose to use intraday trading, swing trading, scalping, and position trading to make a profit from their investments. Scalping is the most commonly used and successful method for people who are new to investing in crypto.
Cryptocurrency is a new potential investment that can really pay off in the long run. People who are interested in investing and who use this information to their advantage should feel more confident in their ability to invest a good amount. Check out our bitcoin exchanges page to buy crypto.