The Red Flag When It Comes to Investing Your Money in Crypto
Do you invest because you understand it well enough or due to the hype?
The hype is here, I’ve seen stories shared by friends bragging about their portfolios. Huge media repeatedly producing stories about how people got lucky by investing in cryptocurrencies.
It feels like another California gold rush — When approximately 300.000 people traveled to California to mine gold. The fear of missing out forcing these new-called investors to join the gold rush.
There is nothing wrong with investing in crypto — I do invest in it too — but most people aren’t investing, they’re gambling.
It’s always okay to follow the trends as you understand the financial risk, there are lots of investment rules, but one thing that I follow is that you can’t invest more than 10% of your total wealth.
The question is, when you should invest in crypto and when you should avoid it?
The get rich quick scheme
Yes, we have read the stories about some people becoming an almost instant millionaire by investing in crypto. But how many stories published about people who lost their assets on crypto?
Unlike stock markets, the crypto market is very viotile. It would be wise to only invest the amount of money that you’re willing to lose.
As pessimist as I sound, but I love investing in crypto, I’ve made some fortune and also lost some of it. It’s always exciting when you’re watching the market going up and green, it makes you want to invest more.
Not until the market turned down and red, then you would tell yourself “I knew it was stupid to invest in it in the first place”. Just like Elon Musk said, “Cryptocurrency is promising, but invest with caution”.
The salespeople are rapidly spreading the news that crypto could make you rich across platforms. But ask yourself, “Why should some strangers on the internet care about making me rich?”.
They are looking for victims, and guess who will be the victim? Just like in a casino, there’s a saying that the house always wins. Understanding the risk, and research about it first could save you lots of trouble ahead.
So when is the wise time to invest in crypto?
Invest because you believe that it will shape the future into a better place
There are lots of cryptocurrencies functions that money doesn’t hold, the most important feature is decentralization — It means that no banks or central institution that holds your money.
It is no doubt that people are getting sick of some very powerful people controlling them what to do. That’s why decentralization becomes a very powerful purpose.
Although the purpose was great, the fact is, cryptocurrencies aren’t really that decentralized. These people are called whales — People who hold a great number of cryptocurrencies. These people still could play the market, because they own a huge chunk of it.
So for now, it’s not really that decentralized. The environmental issues weren’t really that promising as well, since the power consumptions are higher than ever due to crypto mining.
But some coins are offering more nature-friendly features, which is good news. If you believe that this is the future then there’s no doubt to invest in it, you may be one of the early adopters of the future.
Even conventional money was taboo a few hundreds of years ago, as people were so used to trade stuff.
In the end, it would be much better if you know how the mechanism works before you put your money. Don’t let your FOMO makes you ignore the risk,
Because when we are looking at something, we should see it as the whole picture — Putting the good and the bad things together.
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Thank you for reading.
