How much should I invest in cryptocurrencies?
What one feature of cryptocurrencies must an investor take into consideration when deciding on an investment strategy. This is volatility.
Pros and cons of volatility
Volatility, i.e. fluctuation in value, is both a pro and a con of cryptocurrencies. The downside is that the price can collapse, precipitously and very rapidly. In an instant, investments can bring losses instead of profits. The upside is that the price can also skyrocket. Insignificant investments can multiply not hundreds, but thousands of times.
However, over the long term, the price of cryptocurrencies is unequivocally rising, and this is certainly a plus. At least the leading cryptocurrencies, such as Bitcoin and Litecoin, have been showing steady growth for several years now.
Basic investment strategies
Thus, there are two basic strategies for investing in cryptocurrencies:
– Make long-term investments of no more than 20% of your monthly income, according to experienced investors. It is best to do this at regular intervals, such as once a month. Another option is to invest a large lump sum (available money) somewhere for at least a year. And don’t forget your wallet password!
– Make short-term investments in the hope of rapid price growth and with a high risk of losses. In this case, investing is more like gambling, so you should never invest an amount which, if lost, would worsen your quality of life. It should be an amount that you can afford to lose painlessly. You can also invest saved money that you normally would have squandered on all sorts of trifles, alcohol, games, etc.
You decide which strategy to use, but be sure to carefully weigh the pros and cons. We wish you success in your trading and investments!