Cryptocurrency is a good investment if you want to gain direct exposure to demand for digital currency. A safer but potentially less lucrative alternative is to buy shares in companies with exposure to cryptocurrencies. When it comes to your overall cryptocurrency investment strategy, put only what feels right for you to lose. Experts generally recommend investing no more than 5% of your portfolio in cryptocurrencies.
Bitcoin and Ethereum are the two cryptocurrencies that represent the best starting point for new investors, according to experts and NextAdvisor's investment capacity score. Crypto markets are volatile, so buying cryptocurrencies at any price, let alone a drop that could turn into a long-term trend, is risky. While prices could return to previous levels, they could also fall further, leaving your investment underwater. If you're willing to take the risk, first make sure you understand what you're investing in and that you have a cryptocurrency investment strategy in place.
Bitcoin is extremely volatile, so the trick is not to panic and crystallize your losses by selling when its value inevitably drops. The same applies to all investments. Because it's not the only cryptocurrency available, it's essential to research others and find out which, besides Bitcoin, are performing well. Here are some cryptocurrencies that have been sustained through steep price increases and plummets.
Whether you should invest in cryptocurrencies depends on your goals and preferences as an investor, as is the case with any asset or security. We suggest that clients approach it as a speculative investment and consider the high volatility and risks involved. For those who already have a diversified portfolio and a long-term investment plan, we consider cryptocurrency ownership to be outside of the traditional portfolio. You don't need to report cryptocurrencies on your tax return if you didn't sell them or exchange them for another type of cryptocurrency.
Nowadays, while many cryptocurrency users understand and appreciate these differences, traders and lay investors may not realize the difference because all categories of tokens tend to trade cryptocurrency exchanges in the same way. Co-founder of automated cryptocurrency trading platform Coinrule, Oleg Giberstein, believes that cryptocurrencies are suffering the same strains as other parts of the economy, leading to falling prices.
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