Cryptocurrencies belong to the speculative category of investments. With these types of investments, you could either lose all your money or get rich pretty quickly.
Due to its inherent volatility, funds invested in cryptocurrencies should be the ones you would be willing to lose because you are not depending on them to pay your bills or fund your retirement.
Take the case of Sean Russell. Russell is a Brit who invested around $ 120,000 in Bitcoin in 2017. In one month, his investment grew to over $ 500,000. Then, in 2018, his investment fell back to earth, losing 96% of his initial investment.
Then there is the case of Cooper Turley, a 25-year-old man who has earned around 90% of his fortune over the past two years through investments in bitcoin and ether.
While these stories grab the headlines, when it comes to your investments, you need to weigh both the risk and reward possibilities when investing. If you don’t have any cash on hand, you should probably avoid it.
You may already be investing in cryptocurrency
Fortunately, buying cryptocurrency is not a binary choice. Christine Papelian, financial advisor at Smarter Financial Solutions in Phoenix, Arizona, said many people don’t realize they’re already exposed to cryptocurrencies.
“So, for example, if you invest in the S&P 500, you have companies like Tesla and Square, and even Coinbase, that already have their own investments in cryptocurrency or blockchain technology,” she said. declared.
Another way to gain exposure to crypto is to invest directly in companies like Etsy and Paypal that allow users to trade cryptocurrencies on their platforms. But even top companies like Google, Microsoft, and Amazon are using blockchain in various aspects of their business.
It’s also possible to invest in funds that hold Bitcoin and other cryptocurrencies, according to Doug Boneparth, CFP and president of Bone Fide Wealth in New York City. Right now, a few players are creating bitcoin trusts, he said, pointing the finger at companies like Grayscale and Osprey that help retail investors navigate cryptocurrency.
“Buying it in a fund wrap is probably more familiar to the retail investor than anything else,” he said. Additionally, working with a fund means that you deal with the company that manages the fund for any questions or information you need, such as setting a password, tracking gains and losses, or collecting documents. to declare your taxes.
Of course, these services come at a cost – different funds will have different fees associated with them, which people should research before investing in them, Bonaparte said.
Another way for investors to gain exposure to cryptocurrency is by investing in publicly traded companies that have technology related to coin trading or that use blockchain, the technology on which bitcoin is built.
For example, Robinhood Markets allows users to trade digital currencies through its Robinhood Crypto unit. Last summer, Robinhood reported that cryptocurrency transactions accounted for more than half of its sales during the quarter.
Microstrategy currently holds over 105,000 bitcoins (roughly $ 3 billion) and plans to add more in the future.
Experts have also called on companies like Coinbase and Paypal that allow users to trade cryptocurrencies on their platforms. In addition, companies such as Riot Blockchain mine bitcoin and Galaxy Digital invest in cryptocurrency. And, big names in tech like Microsoft, IBM, Google, SAP, and Amazon all use blockchain in different parts of their businesses.
For example, in February Tesla bought $ 1.5 billion worth of Bitcoin and said it planned to accept it as a form of payment, but then quickly reversed that decision.
So, the answer to the question posed at the outset – should I invest in cryptocurrency?
Otherwise, consider taking the plunge, depending on your risk appetite.
How do cryptocurrencies compare to stocks and bonds?
Warning: compared to stocks and bonds, cryptocurrencies are a riskier bet. This is because for a currency to gain value, it must become an accepted method of payment. There is no guarantee that this will happen with Bitcoin or any other form of cryptocurrency and no historical precedents to report.
In contrast, it’s rare for a stock or bond to lose all of its value, but many potential cryptocurrencies, including OneCoin, BoringCoin, and the NanoHealthCare token, have gone down the drain.
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