As an investor or a person looking for ways to make their money grow, they might be thinking or have thought of investing in crypto. But, with the recent scandals that rocked the digital currency landscape, the question of placing an investment in this type of technology may depend on their mood and overall sentiment and knowledge of the market.
Cryptocurrency is like any other form of asset that has its own ups and downs that one should consider before investing. There are factors to heavily consider and study when dabbling in this new form of currency.
Factors To Consider When Investing In Digital Currency
First off, cryptocurrencies are still considered new phenomena in the digital world. And thanks to that, high investment returns are possible due to its nature of being a high-growth asset.
Investors should be aware that cryptocurrency is not free from risks (i.e. scams, fraud, market swings). Anything can happen in this type of asset. Investors wake up one morning and the price of their favorite token explodes – only to find out the next day that it was short-lived and everything is gone.
To avoid losing it big time when it comes to investing, multiple small purchases is advised over a single, large acquisition.
Read the news. Listen to what the experts are saying. Engage in social media discussions before making that foray into crypto.
Also, an investor should be open to investing in multiple cryptocurrencies (ex. BTC, ETH, DOGE, etc.) to have more options and possible investment returns while being involved with other traditional investments (stocks or index funds). As the sages would say: never put all your eggs in one basket.
Another way of earning is to take advantage of pre-sales of certain cryptos since there’s a chance that the pre-sale will offer discounts for early buyers.
Additional Investment Considerations
Aside from the abovementioned factors, an investor should be wary of what’s happening around the world. Being abreast with current events and news is crucial in terms of decision-making in investing in cryptocurrency.
The ongoing Russia-Ukraine war, for instance, has greatly affected many economies around the world, such as Europe wherein before the start of the conflict, it was the biggest customer of Russia’s energy exports.
To support the flight of the Ukrainian people and its government, Europe has banned the import of Russian oil, while Russia responds by cutting off its gas exports via Nord Stream.
Those moves caused the worldwide inflation rate to increase notably, affecting the prices of many assets, including bitcoin.
Recent actions implemented by the U.S Federal Reserve and other global lenders, such as increasing interest rates to combat inflation and decrease the pressure on both equity markets and digital currency prices, play a major role in the mindset of would-be investors.
Aside from the war in Ukraine, other factors such as the “contagion” caused by the collapse of FTX, various regulatory pressures and mandates, bankruptcies and miner capitulation should be studied and considered first before investing in cryptocurrencies in 2023.
Crypto total market cap now showing signs of vigor, at $1 trillion, on the daily chart | Chart: TradingView.com
Meanwhile, there may never be a better moment to invest in cryptocurrency than now, because of the current low prices.
At the moment, the cryptocurrency market is in a state that is practically equivalent to a clearance sale, and it is possible to stock up on high-quality assets for a portion of their original cost.
Still, before moving forward with any choice on investing in crypto, it is essential to have a thorough grasp of the potential risks involved.
So, is investing in crypto this year a wise or foolish move? There are really no definite “yes” or “no” answer. At the end of the day, it all depends on the individual’s desire and judgment.
Again, as the sages would say: you’re never going to know until you try.
(Disclaimer: In no way should any of the content of this article be construed as investing, financial, trading, or any other kind of advice.)
-Featured image by Getty Images/iStock
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Author: Christian Encila