Key factors to consider for reducing the risk of cryptocurrency investment.
Cryptocurrencies are highly profitable investments, but they are also highly volatile and risky. Cryptocurrency investment selections, according to experts, should be based on research, just like stock and mutual fund investments.
“When investing in crypto, investors must have a long-term strategy and not expect a quick return because the value of cryptocurrencies is determined by market supply and demand,” says Ashish Singhal, Founder and CEO of CoinSwitch Kuber.
When it comes to investing in cryptocurrency, it is best to start small. Cryptocurrencies are a new asset class, and investors should treat them as if they were making a high-risk, high-reward investment in a company.
“Start small with 1-2 percent, and gradually increase to 5-10 percent,” says Avinash Shekhar, Co-CEO of ZebPay. To handle volatility, rupee cost average into a crypto asset. Price volatility is a common feature of a new asset class, and we may see more price stability as the market matures.”
Bitcoin, Tron (TRX), Ethereum (ETH), and Ripple's XRP are some of the most popular currencies right now. While Ethereum is now the most popular cryptocurrency, analysts claim that other options such as Ripple (XRP) and Litecoin (LTC) are gaining interest due to their technological benefits.
Should you borrow money to invest in cryptocurrency?
When it comes to investing, each investor has their own risk appetite, which is determined by a variety of criteria. According to experts, it's always advisable to invest a sum that you won't need right away and that can withstand market volatility. Taking out a loan to invest is not recommended; instead, one should begin investing with tiny amounts over time to achieve greater results. Crypto SIPs, according to experts, are the most effective approach to begin investing in tiny sums at regular intervals.
“A reasonable strategy to investing in crypto would be to not borrow and invest in any asset class, whether crypto, equities, or even gold,” adds Singhal of CoinSwitch Kuber. The reason for this is that all types of assets are volatile and do not always produce a consistent return, whereas loans have interest rates that must be paid on a consistent basis.”
“Investors do not always need to invest large sums of money in cryptocurrencies; they can buy a portion of a currency of their choice and grow their investments as and when they have more money to invest,” he continues.
The right approach to investing in cryptocurrency
When it comes to crypto assets, investing for the long run is the greatest option. “Cryptos like Bitcoin and Ethereum have strong fundamentals and multiple use cases,” says Shekhar of ZebPay. Buy and hold (holding your crypto for the long term) is the ideal investment strategy for crypto assets, as you may have heard a lot in the crypto market."
Experts say, when it comes to investing in the crypto market, one should take it slowly and steadily at first. Begin by investing tiny amounts of money and gradually increase your stake as you gain experience in the arena.
“Maintaining a healthy portfolio, for example, by investing in a basket of coins rather than only Bitcoin, can help to minimise losses,” Singhal says. Also, don't act on rumours or gossip. Well-thought-out research would aid in making good investment decisions.”
Risks to consider while investing in cryptocurrency
When buying and holding crypto, investors should always choose a reputable site. “Investors should pay attention to education before investing in crypto,” Shekhar continues, “such as the necessity of self-custody of currencies, crypto basics, and so on.” This will aid in selecting valuable cryptos and avoiding FOMO into assets with little to no underlying value based on celebrity tweets. Knowledge of the fundamentals of cryptocurrencies such as Bitcoin and Ethereum can also aid in the development of a long-term wealth creation strategy rather than FOMO-ing in or panic-selling when the market takes an unexpected turn.”
Additionally, while selecting an intermediary, search for a reputable platform that can give both ease of use and security without complicating the investment process.
“One should not overlook the reality that the cryptocurrency market, like any other asset class, is volatile,” Singhal warns. Unexpected shifts in market sentiment can result in price swings that are both abrupt and rapid. Use only legitimate exchangers that follow KYC guidelines.”
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