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Investing in crypto is definitely a touchy subject in the world of personal finance. Some financial figures are fiercely anti-crypto because of the risk involved. Others are more open-minded because they believe in the blockchain technology behind crypto or because of the staggering increase in value.
Despite its controversy, crypto is clearly gaining momentum. Some of the biggest cryptocurrencies have now become household names. The number of people buying crypto is growing rapidly, especially now that there are so many quality cryptocurrency apps that make the process easier.
While I had tried crypto before, I made it part of my investment strategy this year. If you’re hesitant to invest in crypto, here’s what convinced me to do it.
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1. I have a balanced portfolio and an emergency fund
The main reason I feel comfortable buying cryptocurrency is because I am in a stable financial position. I invest in a mutual fund every month to build up a retirement nest egg. I also buy stocks and have an emergency fund large enough to cover over six months of living expenses.
These are all good prerequisites to check before investing in crypto. Due to the risk associated with cryptocurrencies, it is not wise to place all your hopes of retirement on them or invest in them without first building up an emergency fund.
2. I wanted to add a more risky and profitable investment
I’ve always liked the idea of ​​putting some money into investments that offer more risk and rewards. Most of my money still goes into stocks because stocks are more secure. But there is nothing wrong with adding more interesting assets to your portfolio, at least in small doses. If you’re interested, investing 5-10% of your portfolio in these types of investments is a solid balance between safety and potential profits.
Cryptocurrency certainly does the trick as a high risk, high reward investment. Big price fluctuations happen all the time. Almost everyone has heard of the remarkable rise in Bitcoin (BTC), which went from a value of just over $ 5,000 in 2020 to over $ 50,000 a year later.
It is far from the only piece to have this kind of results. There have been massive price gains for Ethereum (ETH), the second largest cryptocurrency. We also saw Solana (SOL) climb by 7,000% in value between early 2021 and late August.
3. I have plenty of time to wait for it to pay off
Another reason I am comfortable with investing in crypto is that I am still young and can afford to take more risks.
If the retreat was around the corner, I would probably be more careful. Since it doesn’t, I don’t mind waiting five years, 10 years or more in the hope of a sizable return on my investment. And even in the worst-case scenario where it doesn’t pay off, I have time to continue building a strong retirement fund, so I’m covered regardless.
4.I like the returns available from lending and staking crypto
One of my favorite things about crypto is the ability to earn rewards on your holdings. The most common ways to do this are by lending and staking.
Crypto lending works like money lending, and there are several crypto exchanges that offer this feature. Gemini Exchange is a secure option that offers high interest rates through Gemini Earn®. And if you’re worried about crypto volatility, you can lend out stablecoins that aim to keep up with the value of the US dollar.
Crypto staking is when you pledge your crypto for use in validating transactions. Many coins offer interest rates of 20% or more for staking, so you can earn quite a bit that way. However, not all of these coins are good investments, so it’s important to do your research on which coins you plan to bet.
5. I think at least some cryptocurrencies will be successful
No one knows what will happen with cryptocurrencies, and every time you invest in them you run the risk of losing your money. That being said, I think there is a good chance that some cryptocurrencies will have long term success.
Bitcoin appears to be carving out a place for itself as a store of digital value. Ethereum introduced the idea of ​​a programmable blockchain, and it’s now home to all kinds of decentralized finance (DeFi) applications – applications that offer financial services without an intermediary. Stablecoins could become a fast and affordable way to make peer-to-peer money transfers.
There are many ambitious cryptocurrency projects. It’s hard to know which one will be the most successful, and that’s why I like to invest in a mix of different cryptos that look promising.
Choosing how to invest your money is never a decision to be taken lightly. I started investing in crypto based on my current situation, plans, and how I felt about the crypto market as a whole. Try to take this approach if you plan to invest on your own.
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