It seems that cryptocurrency is a new term, but in fact, it’s been out there for a while now. Even before the launch of the first cryptocurrency, Bitcoin, in 2008, the term “digital money” has been used. But today, cryptocurrency is something most of us are used to.
Even though not every person currently has an e-wallet with some digital coins, some of the users might be thinking about whether it’s a good idea to invest in cryptocurrency. And in fact, it could be a great idea.
As everyone already knows, the prices of the most popular cryptocurrencies are high. And when bought at the right moment for a cheaper price, it could become a great investment. The recent events when Elon Musk’s company has bought around a 1.5bn of Bitcoin coins and the prices went up, prove this fact.
But is it a good idea to invest in cryptocurrency now? When is the right moment? Here are a few things to learn about investing in cryptocurrency.
Volatility
You may have noticed that the price of a cryptocurrency goes up and down, but not like with fiat money. For example, today, the price of BTC can be 20.000 dollars, tomorrow it may reach 50.000 dollars, and a week later it could drop to below 20.000 dollars. The price of digital coins is volatile due to the relatively low volume of coins within a market.
When the volume of the currency within the market is so low compared to fiat money, then the prices drop and go up easily. This means that investing in cryptocurrency can be risky.
Hard to predict
The situation with Tesla is a perfect example. Recently, Elon Musk’s company has bought a huge amount of Bitcoin. This event has impacted the price of BTC – its cost has jumped 17%. Technically, those who bought cryptocurrency when it was a lot cheaper, can now sell it and it will be profitable.
But no one knows what will happen tomorrow. Someone can spread a rumor that hurts the reputation of BTC digital coin and the price may drop. That’s what makes it risky, it’s hard to predict. On the other hand, that’s why people prefer investing in it – if they buy 1 BTC for 15.000 dollars and tomorrow the price goes up to 50.000, the user gets a nice profit.
Unknown factors
The wisest thing you can do before investing in any digital currency is to find out more about that currency. If you don’t know how it works, how it is produced, what impacts its price, how can you be certain that it’s a good investment? Follow all the rules about the currency, and invest in it only when it’s a perfect time.
Cryptocurrency – should you invest?
There is a very simple rule when you decide to invest in something – consider whether you can afford to lose your investment. Here are some important factors to consider:
- Do you have earnings saved that can cover your expenses for around half a year?
- Do you have stability in life? For example, a job where you earn money and gain a salary or wage. Do you have where to live, etc?
If the answer to these questions is yes, then you can afford to lose the investment. Any investment is a risk, so it’s important to protect yourself before you invest. The same rule can be applied when investing in cryptocurrency. Only if you are certain that you can afford the loss of investment, you may try your luck and invest in any cryptocurrency you like.