Cryptocurrency has been the hottest topic in the pages of investors from over a decade. Every time the price fluctuates it takes the headlines on every media channel. But with this also comes the fear, the fear of investing.
This is the reason why you are probably reading this article. Cryptocurrency has always been one of the trending topics since the 2017 bull run. Many people get mostly demotivated looking at the names who made it big during the bull run. The time is mostly mistaken to be over and the crypto bubble to have already burst.
After the end of 2018, the market seemed to be sleeping until the mid of this year 2019 the charts again began to rise. The price of bitcoin that was sitting in the range of $3000 rose and even touched the mark of $12000 which was the second highest after the $20,000 high.
Even some of the most asked questions on the internet related to cryptocurrency were the above. Most of the questions circled around which currency to invest in and their doubt around whether to invest or not.
With the volatility of the market, it is obvious that people want to invest in something valuable. The high returns of cryptocurrency make this asset very lucrative to invest in. If you have already invested in other assets and want to diversify, cryptocurrency is always a good option. Cryptocurrency assures you high returns against your investment. And not forgetting to mention the chance to reach the skyrocketing prices.
Cryptocurrencies are basically like any other investments with its pros and cons. These are discussed in detail in this article and also ways to tackle the cons.
As we have discussed enough the question, let us discuss the reason for it.
Cryptocurrency is volatile
One thing that makes this market such a vast topic under supervision is its volatility. The technology behind the whole cryptocurrency is something very new to the people and has attracted all the techies in the market.
Starting from the multi bitcoin valued pizza to alternate payment option in many retailers today cryptocurrency has gone through a long journey.
Many people are suspective of Blockchain
There are many people who do not fully understand the concept of blockchain. This is the reason why the cryptocurrency is mostly understood as something that only is used by frauds and tax defaulters. Blockchain because of being decentralised does not rely on any central authority for all the information stored, and further to be manipulated. But because of that people misunderstand it to be untraceable.
Whereas the truth is that bitcoin is completely traceable with the benefit of our personal information not being leaked. The growing problem with these centralised authorities was that all the information that they had with them was mostly sold to other companies sabotaging our privacy. This problem has been completely removed by blockchain.
Is it too late?
This is the question that revolves around most of the investors today that is it too late to invest in cryptocurrency. As they have seen in recent years the price dips and rise they are sceptical about investing in cryptocurrency.
But here is a thing.
- If you have separate money kept especially dedicated to investment that is not pushing you to work extra to pay bills then you should think about cryptocurrency.
- If you are already investing in different assets and want to add more to diversify your portfolio then cryptocurrency is a good option.
The above two points are a summary of what every investment book, article or blog you have ever read has to offer. These points just like any other investment apply to cryptocurrency as well.
How are cryptocurrencies same as any other investment.
Looking at the charts, cryptocurrency exactly behaves just like any other investment in its infancy stage. Any new investment in the market from the very beginning is not as stable as it becomes over the years getting people’s trust and place in the market. And cryptocurrency with the new technology is not an exception. The ways to tackle the risks in crypto investment is also just like any other one. We have discussed this in detail further.
Along with making a new place in the market as an asset the technology part of it is also alien to many investors today which is the reason why people are sceptical
One way of overcoming the fear of falling is to diversify the portfolio.
From ages, this method of investment is taken by investors. Not only with different assets but also with the assets but its different kinds. Let me explain this point in detail in the next paragraphs.
Diversification of Portfolio:
The greatest advantage that one has with cryptocurrencies is the amount of diversification it provides. You can choose from hundreds of cryptocurrencies present in the market along with investing in other assets as well.
The best ways to choose crypto assets to invest are
1. Check the Market cap:
Usually, the coins with the maximum market cap are the most popular ones. These are preferred by most people, therefore, the chance of whale frauds are very less.
Whale frauds are a type of fraud that involves huge parties trying to manipulate the market by trading in bulk. These kinds of frauds are highly dangerous for individual investors as it misguides them the actual value of the currency.
2. Check the team behind the coin:
A common mistake that people make is overvaluing or undervaluing a coin. A coin in its initial stage may gather a lot of attention that increases its prices. The price may go way beyond the coin’s capability. After a certain time when the coin is not able to function properly, it loses its value and falls down to the real value.
3. Falling into FOMO:
FOMO stands for “Fear of missing out” and this usually happens in instances like the above. Whether its a dip in market or a short term trend, people tend to fall into FOMO and make impulsive decisions. This is usually not a healthy choice when it comes to investing.
With diversification comes many benefits. Benefits like greater security, less volatility, increasing chances of winning a jackpot and decrease in the chance of losing assets. When your portfolio is diverse you have many coins in hand and the chances of one of them having a swift increase in prices are much greater than of the only asset you are holding. With this also comes another obvious advantage. The chances of the price of all your assets falling at the same time and at the same rate are also much lesser in a diversified portfolio.
So, the final question of is it too late to diversify can be answered.
Looking at all that is mentioned above, the problem of risks in cryptocurrency is reduced to a large extent by diversifying.
The crypto market is very unpredictable. When many people lost hope after the $20,000 high it again proved to be profitable who was when the prices reached high again in the middle of 2019. With the increasing number of big giants showing their interest in cryptocurrency, it is highly doubted if it will ever go down again. Retailers like Starbucks, Microsoft, etc have also included it as an alternate payment option this year.
Around the world, people are adopting cryptocurrency at a faster rate in their day to day chores than before. The benefits like instant transfers, low handling fee and decentralisation have made this asset one of the hottest topics of discussion in the past decades.
Diversification helps to overcome the risk of volatility of investments. And it is never too late to invest in cryptocurrencies as it is still in its infancy stage. 🎉🔥