Getting into crypto is easier than ever, but should you invest in it?

Once a niche market where only the bold and the risk-seeking dared to venture, cryptocurrencies are now increasingly integrated into traditional finance, attracting traders and investors from all walks of life. With numerous exchange platforms providing quick and simple access to an extensive range of digital currencies and the emergence of exchange-traded funds (ETFs) linked to Bitcoin and Ethereum in the US, barriers to entry for crypto investments are at their lowest. One can buy Bitcoin with debit card as easily as buying any other type of product or service without having to deal with complicated procedures or meet stringent criteria. 

Although crypto is still regarded as a technically complex and uncommonly volatile investment instrument, the fact that digital assets are spreading like wildfire and gaining more ground in institutional finance gives investors a sense of reassurance and comfort. This encourages them to diversify their portfolios with crypto. 

However, just because crypto is easily accessible nowadays and a growing number of investors are seeking to gain more exposure to this asset class doesn’t mean you should give in to herd mentality and jump into crypto without giving it a second thought. FOMO can push you to do wild things, and the promise of generous rewards can be quite heady. But if you’re thinking about dipping your toes into such a controversial and risky asset class, you need to tread carefully and look at both sides of the coin – pun intended. 

The case for crypto investing 

We’ve already established that accessibility, popularity, and hype are not solid reasons to start investing in crypto. So, what would be some reasonable motives to get started? 

Earning potential 

The first and most obvious incentive for getting into crypto is the potential to earn large returns, with potential being the operative word here since there is no guarantee that you’re going to make a profit. The idea of getting rich overnight is more of a myth than a reality. However, because crypto is much more volatile than traditional assets, it also comes with the possibility of higher returns. 

Therefore, if you’re able to ride the wave of volatility and manage risks effectively, you might just be one of the lucky few to cash in substantial earnings. Besides, if you embrace a long-term approach and hold your crypto investments for a longer period of time, you stand better chances of seeing increased gains. The general tendency of the market is to go up despite the occasional dips.   

Diversification

Wise investors understand the importance of diversification as a risk mitigation technique.  With a diverse mix of assets in your portfolio, none of which takes up a disproportionate amount of funds, you can weather adverse market conditions and greatly reduce the risk of losses. 

From this perspective, crypto can act as an effective diversification tool for those who want to spruce up their investments while keeping risks in check. Since we’ve come to this topic, we also need to point out that it’s advisable to diversify within the same asset class as well. This means you should spread your crypto investments across multiple coins and avoid a Bitcoin-centric approach like some investors tend to do. 

Innovation 

One should not ignore the fact that digital currencies are at the forefront of innovation in the financial space. The blockchain technology that serves as their backbone is rapidly spreading across a myriad of industries, where its fast-expanding use cases can address long-standing challenges and revolutionize systems and operations. 

When people invest in crypto, they don’t just open opportunities for financial gain but also become part of something much larger. Supporting a highly promising technology that is primed for growth and has the power to change the world for the better. Some argue that one day, crypto, and the blockchain could become mainstream features in our society. So, by investing in crypto in its early stages of development, you get the chance to prepare yourself for future advances that might influence various aspects of life. 

Why you need to be cautious 

If crypto would only present benefits and no drawbacks, navigating the market would feel like a breeze. But as it happens, digital currencies aren’t without their flaws.  

Volatility 

Crypto’s well-known volatility has caused the ruin of many investors. A lot of people go into crypto hoping they’re going to build wealth and exit the market penniless. That’s not to say everyone in crypto experiences dramatic losses, but given the market’s unpredictable nature, the likelihood of things going south is not to be ignored. That’s why experts recommend only investing money that you can afford to lose, since you might not 

Scams 

Another reason some investors are reluctant to dive into the crypto marker is the numerous scams and frauds that have plague this industry since the very beginning. Although the crypto environment is becoming increasingly regulated as authorities’ involvement in crypto is growing, illicit activities remain a major concern that aspiring investors should take into account. 

FOMO 

Crypto investors have another invisible enemy they have to confront and defeat: their own emotions. FOMO, short for fear of missing out, is a prevalent issue in investment circles. It refers to people’s tendency to make rash decisions because they worry that they might miss out on profitable opportunities if they don’t act fast. Needless to say, this reckless behavior can spell trouble in an investment context, leading to poor decision-making and a higher risk of losses.  

Bottom line 

The moral of the story here is that you shouldn’t invest in crypto because everyone else does or because you hope to become a millionaire in the blink of an eye. Do it if you want to expand your investment horizons, become involved with advanced tech, and prepare yourself for the future. Try to leverage crypto’s profit and innovative potential, but never lose sight of the pitfalls, and always follow your reason, not your emotions.