Unlike traditional cash payments, cryptocurrencies can be exchanged without relying on a central authority like a bank. Cryptocurrencies can be exchanged for goods and services, though we have seen a lot of people use them as investment vehicles.
It’s still a speculative and volatile investment. Cryptocurrency may not be for you if you’re not willing to lose money. You need to carefully consider whether or not you’re willing to take on the risk of having cryptocurrency in your portfolio. Investing in crypto has the ironic aspect that it is just as likely to make so much money as it is to lose that money.
To determine your risk appetite, you’ll need to have invested in other investment instruments prior to deciding whether cryptos are for you. According to The Motley Fool, cryptocurrency is a good investment if you want to gain direct exposure to the demand for digital currency, while a safer but potentially less lucrative alternative is to buy the stocks of companies with exposure to cryptocurrency.
When investing in crypto, knowing what risks you’ll have to contend with can better prepare you for the future. Here are a few to consider:
- The volatility of the industry
- Regulations imposed on the industry by the government or any other bodies.
- Highly Competitive environment
As mentioned earlier, knowing your risk tolerance level will help you determine if crypto is for you. You can determine what level of risk you are willing to take on an investment based on your risk appetite. Consider the following tips as a guide:
- Know your income
- Identify your investment goals
- Know your attitude towards risk
- Determine your time frame, that is how much time you think you have left to invest.