Risks of investing in crypto

Risks of investing in crypto

Contents of this article:

Investing in cryptocurrency is a promising but risky way to make money. Despite the rapidly growing popularity of digital assets, an investor should be prepared for the risk and loss of funds. We will tell you what problems arise when investing in crypto, and how to invest money safely.

What should a beginner know before investing?

The first thing a novice investor needs to know about cryptocurrency is a highly volatile area. Digital assets are not backed by gold and other physical values. Only a separate type of crypto, called stablecoins or crypto dollars, is pegged to fiat currency. The cryptocurrency exchange rate depends on the market trend, supply and demand, so it cannot be regulated and controlled. Using the example of Bitcoin, we see how the very first, demanded and popular coin can lose more than half of its value in a relatively short period. At the end of 2021, Bitcoin was worth more than 65 thousand dollars, and in the summer of 2022 its price does not even reach 20 thousand. Experts predict the growth of the coin, but when it will be, and how much the quotes will grow, it is difficult to say.

A beginner should learn about the principles of diversification. By investing all your money in one coin, you risk losing it if the rate drops sharply. By forming an investment portfolio of different cryptocurrencies with high, medium and low capitalization, you reduce the risks of draining capital, in the event of a fall in the exchange rate of one currency, you can compensate for the losses by increasing the other.

It is also worth exploring popular and safe ways to invest. You can invest money directly in cryptocurrency, but not only. There are also investments in stocks of crypto -currency companies that mine or make money from crypto in other ways. You can invest in cryptocurrency funds – this is also quite promising and safe for capital if you choose a reliable fund.

Cryptocurrency investment risks

Earnings on cryptocurrency are associated with risks, because this is a market with high volatility. Nevertheless, the crypt has high liquidity, and it is profitable to invest in it.

Main investment risks:

  • abrupt changes in course;

  • unpredictability of the market, complexity of forecasting;

  • market susceptibility to manipulation, exchange rate dependence on supply and demand;

  • lack of clear rules and laws to protect investors’ risks.

It is a mistake to think that investing is easy and does not require learning. In order to manage risk, it is important to make investments wisely, approaching the process and choosing an asset seriously. You should not immediately invest all your free money in crypto, it is better to invest a small amount every month. Progressive investments will make it easier to get used to the cryptosphere, study its nuances, understand how to choose the right assets and build an investment portfolio, analyze market conditions and trends.

How to invest in crypto safely and profitably?

One of the main principles of successful investments in cryptocurrency is diversification. It is necessary to choose coins with different capitalizations. The lion’s share of the portfolio, of course, should be occupied by assets with large capitalization, they are ideal for long-term investments.

Experts advise choosing crypto from different segments – these are decentralized coins, coins issued by centralized exchanges, tokens DiFi projects, stablecoins or crypto dollars. The diversity of the investment portfolio is the protection of capital and high chances of making a good profit. However, the more assets you buy, the more time you will have to spend on studying the market, tracking the dynamics of rates.

It is worth accepting the fact that you cannot do without risks in the cryptocurrency industry. Even experienced investors and traders lose money by making mistakes. But the number of errors can be minimal, to achieve this, you need to carefully study the field. Take a course at Crypto Crew and become an experienced investor! Working with our mentors, you will learn everything you need to make your first successful investment and earn income from crypto, master the basic skills of a trader and get rid of the fear of taking reasonable risks.