Cryptocurrency – an investment for risk or a reliable tool?

It is premature to consider cryptocurrency as a full-fledged financial instrument that allows you to safely invest citizens’ funds. Cryptocurrency is still a very speculative instrument that has a very high volatility, its movements can consume up to 15-20% of the investment that an investor invests in such a risky and highly volatile instrument in one day.

You should only take risks when you are willing to tolerate fairly high fluctuations in your portfolio. That is, if you want to consider crypto-currencies as an investment tool and “sit in crypto-currency” for many years, then your investments should be made without leverage and with an understanding that it is for years. And also you must accept that any drawdowns that will be along the way need to sit out.

For example, you are investing in Bitcoin. At first, its price was $60,000, and then at some stage it sank to $25,000. You will lose more than half of your portfolio. So, if you have a long-term investment and you understand that your goal is more significant, for example, $100,000, $200,000 or $300,000 at the cost of bitcoin itself, then you need to calmly sit out these losses. You need to understand that in this tool you have assumed this risk. If you do not have such readiness, then you need to understand that on such extreme movements you can gradually lose your entire deposit, closing negative transactions.

Summing up, I note once again that no one can give a guaranteed forecast regarding the stability of the cryptocurrency market. Since it is characterized by spontaneity and the absence of any regulators. Therefore, before investing in digital money, you need to study information about cryptocurrency exchanges. The cryptocurrency market is volatile, so you should be prepared for dramatic cryptocurrency price fluctuations. To reduce risks, you need to diversify your investments – divide your capital into three portfolios. You should not invest all your funds, for example, in one cryptocurrency just because you know its name. This is a big risk. You need to invest conservatively, do not chase fast money.

Source: findcoinstar