How Are You Going To Invest
If you have done your homework well, by now you have ideas of the various aspects of crypto to invest in.
Are you buying and HODLing? liquidity mining? staking? yield farming, trading?
Are you exposing yourself to Bitcoin only or altcoins inclusive? What altcoins are you going to buy?
You get the point.
What is your crypto investment focus?
Answering these questions takes a lot of research and if you’re serious with your money you will do it.
Resources for you:
Personal Finance: Be Sure To Understand Cryptocurrency Before Investing
With the introduction of Bitcoin in 2009, much of the world has become fascinated by cryptocurrency. Within its first decade, Bitcoin reached the mainstream, becoming a household name. And more recently, on Sept. 8, El Salvador launched Bitcoin as a national currency. Because of its popularity alone, many investors and financial advisors cannot escape the question: Should we invest in cryptocurrency?
To get to the bottom of this, lets first start at the top.
Put Financial Safeguards In Place
First and foremost, you need to prepare for those times when things don’t go as planned.
Over the past year, workers who lost income because of the pandemic had to tap into savings, take on debt or enter into hardship programs to afford their bills. This time has been a stark reminder of the importance of having an emergency fund.
“When you’re young, you can feel like Superman or Superwoman, but when the bubble happens, you could easily be out of a job for nine to 12 months,” says Theresa Morrison, a financial planner in Tucson, Arizona in the US. “Don’t underestimate systemic shocks to the market”.
Morrison recommends saving up six months of living expenses if you’re single, or around three months if you share expenses with a working spouse or partner. But stashing away even a few hundred dollars can be helpful when you’re faced with an unexpected expense. And if you have any high-interest debt, like credit card debt, paying this down can further strengthen your financial position.
Review your insurance coverage, too, because these policies can provide much-needed money during difficult times. Life insurance can be especially important if you have dependents.
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A Better Way To Invest
Bottom line? The road to building wealth is slow and steady, and there are stillway too many unknowns when it comes to cryptocurrency. Could crypto become a more legit way to invest later on down the road? Sure. But as things stand today, just say no.
Get-rich-quick schemes are just thatschemes.Dont risk it and pour all your hopes, dreams and money into them. Instead, sit down with a SmartVestor who has the heart of a teacher. Let them walk you through a solid strategy for investing. And dont knock that 401, folks. Its the number one wealth-building tool of millionaires! And millionaires dont build wealth through risky investments like crypto.
About the author
Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.
Two: Connect Your Exchange To A Payment Option
After you have chosen an exchange, you will need to gather your personal documents. Depending on the exchange, these may include pictures of a driver’s license or Social Security number, as well as information about your employer and source of funds. The information you may need can depend on the region you live in and the laws within it. The process is largely the same as setting up a typical brokerage account.
After the exchange has ensured your identity and legitimacy, you will then be able to connect a payment option. At most exchanges, you can connect your bank account directly or you can connect a debit or credit card. Though you can use a credit card to purchase cryptocurrency, it is generally something that should be avoided due to the volatility that cryptocurrencies can experience.
Though Bitcoin is legal in the United States, some banks do not take too kindly to the idea and may question or even stop deposits to crypto-related sites or exchanges. It is a good idea to check to make sure that your bank allows deposits at your chosen exchange.
There are varying fees for deposits via a bank account, debit, or credit card. Coinbase is a solid exchange for beginners and has a 1.49% fee for bank accounts, with a 3.99% fee for debit and credit cards. It is important to research the fees associated with each payment option to help choose an exchange or to choose which payment option works best for you.
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How Much Crypto Should You Have In Your Investment Portfolio
Bitcoin is exploding in value, but it’s still crazy volatile with a very uncertain future. In fact, the value of bitcoin has gone from roughly $10,000 to $30,000 in the last year.
But there’s a lot of wild fluctuations, with prices jumping all over the place. So wheres the sweet spot? What percentage of your portfolio should you dedicate to cryptocurrency?
To find out, I spoke with two finance professionals with Atlantas CPC Advisors and Raymond James Financial Services. Varun Marneni, CFP® helps clients navigate the complexities of their finances, and David Hunter, CFA is the firms Director of Research and Investments. Naturally, both of them have fielded lots of questions about crypto.
How To Sell Bitcoin
You can sell Bitcoin at the same venues where you purchased the cryptocurrency, such as cryptocurrency exchanges and peer-to-peer platforms. Typically, the process of selling Bitcoin on these platforms is similar to the process used to purchase the cryptocurrency.
For example, you may only be required to click a button and specify an order type to conduct the sale. Depending on the market composition and demand at the venue, the offering price for Bitcoin may vary. For example, exchanges in South Korea traded Bitcoin at a kimchi premium during the run-up in its prices back in 2018.
Cryptocurrency exchanges charge a percentage of the crypto sale amount as fees. For example, Coinbase charges 1.49% of the overall transaction amount as fees.
Exchanges generally have daily and monthly withdrawal limits. Therefore, cash from a large sale may not be immediately available to the trader. There are no limits on the amount of cryptocurrency you can sell, however.
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Before You Put Any Money Into Cryptocurrencies Establish A Core Portfolio In Line With Your Investing Goals
Social media and crypto talk go hand in hand for millennials. If youre like me and you spend a lot of time online, youll see that investing in bitcoin, dogecoin and other coins is in vogue. According to a survey from NORC, a research arm of the University of Chicago, more than one in 10 Americans invest in cryptocurrencies. Crypto investors tend to be younger and more diverse than traditional stock investors, and 61% started their crypto journey in the past 12 months. Of those who are still hesitant to dive in, 31% say they dont know where to start. Im in that camp. I still do not fully understand crypto, but as I read tweets about folks becoming bitcoin rich, Im starting to wonder if my hesitancy is costing me.
Anyone who thinks theyve missed the boat needs to get one thing straight: You absolutely have not, says Isaiah Douglass, a millennial and certified financial planner at Vincere Wealth, in Indianapolis, who invests in bitcoin. Bitcoin is a small piece of the global investing pie in terms of market value compared with heavy hitters in the S& P 500 index. Currently, bitcoin is collectively worth about $800 billion Apple, the biggest stock in the S& P 500, is worth $2.4 trillion. Bitcoin still has room to grow .
How Many Cryptocurrencies Are There What Are They Worth
More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $849 billion, regaining some ground from recent price lows. Still, the market value of bitcoin is down from April high of $1.2 trillion.
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How Much Has It Grown
In 2011, one Bitcoin was worth roughly one U.S. dollar. By April 2021, Bitcoin reached its highest price of over $64,000.
When running the numbers, Bitcoin averaged a return of over 200% per year over the last decade. Compare this to the annualized return of the S& P 500 stock market index – which had a stellar decade of about 16% per year
Remember To Stay Safe
Buying the best cryptocurrencies is not enough to be a successful crypto investor.
Countless promising investors saw their crypto journey end brutally because they did not pay attention to security.
If youre serious about investing in cryptocurrencies, put some effort into reinforcing your security.
- Read the ultimate cryptocurrency investment strategy guide I wrote about the 50 mistakes cryptocurrency investors make — many of them are related to security.
- Purchase a hardware wallet . Our favorite hardware wallets are the ledger nano s and ledger nano x.
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How Much Crypto Should Be In Your Investment Portfolio
Cryptocurrency adoption is increasing with interest in investment.
There are multiple models which attempt to help investors.
Black-Litterman Model weighs up crypto growth and investor confidence.
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Cryptocurrency adoption is increasing. As a result, many are wondering whether they should include crypto in their portfolios. Figuring out exactly how much is the next challenge.
The increase in adoption by companies like PayPal, the investment by institutions like Rothschild Investments and the recent Coinbase listing are making it harder to deny that cryptocurrencies are becoming a common feature not only in the world but in a well-rounded portfolio.
There are several who suggest different allocations based on the typical 60/40 stock/bonds portfolio. However, by using the Black-Litterman Model, investors can allocate the amount of crypto they hold according to their confidence in its growth potential.
How We Got Here
The inputs to the Black-Litterman model tell an interesting story in and of themselves. The main inputs into the model are global market caps, which we discussed earlier, asset volatility, and the correlation between assets.
It goes without saying that cryptocurrencies are risky. Over the last five years, bitcoins volatility was six times that of stocks and 30 times that of bonds. At its worst, the digital coin saw an 80% drop in value, while stocks were down 20%. Other cryptocurrencies fared even worse.
Betterment sourced the above ACWI data and Cryptocurrency data from third party sources to create the above visualization. Visualization is meant for informational purposes only and is not reflective of any Betterment portfolio performance. Past performance is not indicative of future results.
If an asset is volatile, and one is not able to diversify that volatility away, then investors will require a higher rate of return on that investment, otherwise they will choose not to invest.
The fact that bitcoin is so volatile, but has such a small number of investors suggests that many investors still do not see the potential returns worth the risks. On the other hand, cryptocurrencies are at their core a new technology, and new technologies always have an adoption curve. The story here may be less about expected return versus risk and more about early adoption versus mass appeal.
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Crypto Doesnt Fit Into An Asymmetric Risk Profile
Part of that mission involves safely investing their clients money in ways that provide maximum returns with minimal risk. To achieve that goal, advisors build portfolios into whats known as an asymmetric risk profile a bet where the odds are greatly in their favor.
Youve got to have that asymmetrical risk profile. You want to have the odds really, really in your favor to win over the long-term.
A great example of an asymmetric risk profile in action is a casino. The house always wins is mostly true the house wins at least 70% of the time, and never a percentage point less. To protect this number, and ensure the odds are always in their favor, casino games are designed with tremendous research, data, and care.
In the investing world, risk profiles have to be even more asymmetric, where the house wins 90% or more of the time. Naturally, to achieve such odds in the stock market you need tons of financial models, algorithms, and data trend analysis.
If youve ever wondered why returns on retirement accounts are just 7% while Bitcoin is 700%, thats why the former has some certainty built into it.
At present, cryptocurrency has no certainty built into it therefore, it simply doesnt belong in an asymmetric risk profile.The risk of betting on Bitcoin is nearly 100%, and theres not enough data to say otherwise.
So investing in Bitcoin as an early retirement strategy is like giving a horse LSD and expecting it to get you to work.
Its just not necessary.
Should I Invest In Cryptocurrency
Plain and simpleinvesting in cryptocurrency is not a good way to build wealth for your future. If you really want a solid investment, dont mess around with adding some crypto coins to your digital wallet. Heres the better plan: If youre out of debt, have an emergency fund that will cover three to six months of expenses, and youre ready to invest, then focus on investing 15% of your income in growth stock mutual fundswhich are way more secure than crypto.
Dont give in to stupid just because theres a lot of hype. Weve talked to people who have taken out a mortgage or cashed out their entire 401 early to invest in cryptocurrencyheck no! Dont put it all on the line and risk your financial future, your retirement dreams and your familys well-being. If you cant afford to lose the money, dont invest it in something as unstable as crypto.
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Is It For You
While these returns are certainly incredible, we encourage you to keep several things in mind if you are going to invest in Bitcoin.
Valuation. Traded entirely on sentiment, cryptocurrency lacks economic fundamentals to support any valuation. Stocks, on the other hand, have underlying value based on company profits, giving a logical basis to invest. While some may state that buying cryptocurrency is a way to invest in blockchain , owning Bitcoin doesnt give ownership in the underlying blockchain technology.
Performance. While cryptocurrency may continue its upward trajectory for some time, it is important to remember that past performance does not indicate future results.
Risk. Cryptocurrency is a highly volatile investment. Prices may dramatically fluctuate, even within seconds, and therefore the risk is very high. Investors need to feel comfortable with the risk of loss.
History. What if tulip bulbs each cost more than the average annual salary? Tulipmania really happened in Western Europe in the 1630s when Dutch investors began buying tulips and dramatically drove up the price only to see prices collapse. Or how about the dot-com bubble of the late ’90s? The Nasdaq index quadruped in five years and subsequently fell by 78% within two years.
Hunter Yarbrough is an executive vice president and financial adviser with CapWealth. For more information about Hunter and CapWealth, visit capwealthgroup.com.
What Is Binance And Can I Still Use It In The Uk
The UK financial watchdog has blacklisted cryptocurrency exchange Binance and banned it from carrying out any regulated activity over concerns about its money laundering controls.
The regulator has also ordered the company to stop any form of advertising in the UK.
Binance isnt based in the UK, so the British regulator doesnt have the power to stop investors from buying and selling cryptocurrency using the exchange. However exchanges do have to register with the FCA to operate in the UK.
This is a clear warning that investors should be very cautious.
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There’s Plenty Of Time To Get On Board
The good news is that the rise of cryptocurrency is likely still in the early innings. In the last year alone, we’ve seen a surge in institutional adoption, investor protection, and innovation. The sheer scale and scope of projects that are taking place on the Ethereum and Solana blockchains are nothing short of incredible. Ten years from now, it wouldn’t be surprising if crypto played a role in many of our lives — either through investment or application — in ways we can’t begin to imagine right now.
As previously mentioned, one of the reasons that crypto markets are volatile is that many participants are focused solely on short-term moves. They’re playing a different and riskier game than long-term investors, a game that’s more concerned with where prices are headed in 10 days than 10 years. The 24/7 crypto market feels fast, but it’s important to keep in mind it’s only as fast as you make it. Zoom out, and the charts on Bitcoin and Ethereum speak for themselves. Zoom in to a three month or less time period, and there’s no telling what you’ll find. Taking a slow and steady approach to your investment offers the best way to capture long-term upside.