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The Right Way to Invest in Cryptocurrencies

2 months ago

Bitcoin really has been a bonanza, a volatile roller coaster ride to say the least. It’s no wonder that so many people have decided to visit places like SoFi (go to the website here) to learn more about how they can make investments in this area themselves. It is, after all, a chance to make something out of nothing.

I came to the point in early 2014 that the value of bitcoin had come so far so quickly that I was ready to try to invest. It seemed too good to be true, but I decided to take a risk since I thought some money would likely be made no matter how the market shook out.

I took a position in a leveraged bitcoin ETF that was in the market. This meant I only put money at risk if the fund reached the maximum indexing requirement. This is what I wrote:

I can see no reason for its lower volatility. It does have some weak components, and there are many differences in the ways bitcoin behaves compared to traditional stocks, such as its low short-term volatility. However, the general trend has been toward higher volatility, as bitcoin prices have increased and are now near $100,000.

Yet, I can think of a number of factors that will probably mean the volatility rises in the future. The bitcoin ETF is primarily a tech stock ETF, which means it relies on any digital currency prices that might emerge from its investments. This includes everything from technical indicators that follow bitcoin prices, to predictions about how the Chinese economy and U.S. financial system will shift in the years ahead.

I think investors would be wise to stick to tech stocks, since I believe cryptocurrencies will not hold much value, at least not until they develop new systems that are more useful to their users, which likely won’t happen until the technology has progressed. For now, the speculation is far more entertaining than the technology itself.

In short, I think investing in cryptocurrencies is a high-risk venture that’s best left to those who are comfortable with high risk. However, that doesn’t mean investors shouldn’t enjoy the ride.

So the best way to invest in a crypto is the direct way, by buying some coins, or any other crypto you think is worth looking at, via platforms such as Fireblocks crypto. But those coins should be bought with money you can afford to lose, as there are no guarantees that bitcoin or other cryptos will hold their value.

Cautious Investing Requires Depth

The truth is that, while I consider it highly likely that bitcoin or other digital currencies will hold their value for the long term, there are many factors that can cause a single cryptocurrency’s value to plunge dramatically. Because of this, I’m very cautious when it comes to buying bitcoin or any other cryptocurrency.

That said, I always seek out opportunities where it’s possible to add new cryptocurrencies, even if I am unsure of their long-term worth. That is because even a strong investment can become worthless if the stock market declines or there are unforeseen financial problems with a company or government.

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