Skip to content

What to consider before investing in cryptocurrency

Cryptos are a unique asset, which is why it's important to manage your holdings according to your goals and investing strategy.

Table of Contents

The surge of interest in cryptocurrencies, also known as crypto, has many people curious about how they take part in the game, for instance, live casino Canada. We are here to teach you all you need to know about step-by-step investing in this asset class.

What is cryptocurrency?

Like cash, cryptocurrencies are a form of buying power. They can be purchased with the goal of financial return and are one of the most volatile asset classes.

Although cryptocurrencies have the potential to transform the way people think about and use technology, it is still not working to predict the future. According to Douglas Feldman, the chief investment officer of Stash, the road to the mainstream adoption of cryptocurrencies will be very challenging.

Unlike traditional currencies, cryptocurrencies do not have a central authority. They are decentralized, which means they can be issued, backed, or regulated without the involvement of a central bank or government. According to Feldman, this concept is very important in the design of cryptocurrencies. Units of these digital currencies, which are known as tokens or coins, are created through a process that uses blockchain technology.

Blockchain technology is a distributed ledger that records the value of a virtual currency. It is used by various parties to manage their transactions. It can be accessed by anyone who has an internet connection.

What to consider before investing in cryptocurrency

The volatility of cryptocurrencies can be unpredictable, and it can affect the value of your investments very. Before you invest in this asset, make sure that you research it to avoid getting scammed as well as it's important to consider the reasons why you're interested in this asset. For instance, are you looking to cash in on the current trend or are you planning on building a long-term strategy? According to Feldman, investing in cryptocurrencies is not an easy way to make a quick buck. It requires a lot of patience and a strong belief in its long-term potential.

According to Feldman, while cryptocurrencies may seem like a great long-term investment prospect, it's important to be clear about your goals and expectations before jumping in. Investing in this asset is a long-term commitment.

Another common mistake people make when investing in volatile assets, such as cryptocurrencies, is making the emotional decision to buy when the price is rising and sell when it is going down which is not a good strategy.

Is cryptocurrency a good investment?

Although cryptocurrencies may seem like a great long-term investment prospect, it's important to consider the factors that will determine whether they are a good fit for your portfolio. One of the most important factors that you should consider is your tolerance for risk. The volatility of cryptocurrencies can affect the value of your assets very quickly.

Although an asset can be traded on the open market, it doesn't necessarily mean it's the best investment for your situation. All investments carry a high level of risk and can lose money.

How to invest in cryptocurrency in 2023

It's important to know where to store and buy cryptocurrencies. Due to the increasing number of exchanges, it's now easier than ever to invest in cryptocurrencies. Yet, before you start investing, you should.

1. Choose what cryptocurrency to invest in

Like with stock market investing, you should search cryptocurrencies to determine their unique attributes, as well. You can invest in one or a few of them.

Unfortunately, due to the nature of cryptocurrencies, it can be hard to identify which ones are safe to invest in. One of the biggest risks that you should avoid investing in is pump-and-dump schemes. According to Feldman, you should only invest in established and reputable companies.

It's your responsibility to research the investment risks associated with a particular cryptocurrency. Social media experts may be focused on something other than your best interests. Even though you can mitigate some of your risks by investing through a reputable platform, the cybersecurity and fraud risks associated with cryptocurrencies remain.

In 2022, it was revealed that FTX, a prominent cryptocurrency exchange, was being operated by criminals. The platform was regarded as a reputable one.

2. Select a cryptocurrency exchange

You should only invest in cryptocurrencies through an exchange or an investment platform such as Stash. Some of the factors you may want to consider when choosing an exchange include the fees, security, and volume of trading.

3. Consider storage and digital wallet options

Since cryptocurrencies are completely digital, you need a digital space to store your coins. According to Feldman, many new investors prefer to store their assets on an investment platform instead of an exchange.

Before you start investing, it's important that you choose a secure and reputable platform that will handle your assets. According to Feldman, a platform should be able to protect its users from various threats, such as cyber-attacks.

A digital wallet is an essential part of any cryptocurrency investor's toolkit. It holds the private keys needed to access the asset, which is recorded on the blockchain. There are two types of digital wallets: a cold and a hot one.

Hot wallets are generally more convenient and can be accessed online. Cold wallets are devices that keep their users' cryptocurrency keys offline. According to Feldman, holding cryptocurrencies in a physical wallet can provide extra security measures.

4. Decide how much to invest

The amount of money that you should invest in cryptocurrencies will depend on various factors, such as your budget and risk tolerance. You'll also want to take into account the fees and transaction costs that are charged by different exchanges.

For people who want to invest in high-value cryptocurrencies, such as Bitcoin, Feldman advises investing on a dollar basis instead of buying whole coins. This eliminates the need for them to come up with thousands of dollars to get Bitcoin.

At Stash, we suggest limiting your exposure to cryptocurrencies to less than 2% of your total portfolio to cut potential risks.

5. Manage your investments

Since cryptocurrencies are a unique asset, it's important to manage your holdings according to your goals and investing strategy. With that in mind, apply the principles of the Stash Way, which is focused on long-term investing and regular budgeting. Through the platform, you can easily manage your investments in cryptocurrencies.