Cryptocurrency can be a risky investment, whichever way you slice it. Therefore, the decision to put money into this digital asset is something that investors need to consider carefully.
Sure there is potential to turn a profit with cryptos, but not everyone is fit to hold them. Hence, the question. Are you fit to invest in cryptocurrencies, or you're better off choosing other investments?
To help you decide, here are four signs that you may not be cut out for investing in cryptocurrency.
1. You Look to Make Money Fast
Buying cryptocurrencies that are making a bullish run and selling them immediately is not exactly an excellent plan, as your odds of losing with this strategy are pretty high.
Short-term trading could put you in a difficult situation since it's hard to be spot-on with the time you're making a buy, and you won't always be aware that an asset is rising until its price is already at or close to its highest.
Investors with long-term investment horizons often do better than short-term investors in the markets because they don't need to worry about timing their purchases.
Therefore, if you don't plan to hold on to your crypto investments for a very long time, you're probably better off finding other investment options.
2. Low-Risk Tolerance
It's worth thinking twice about investing in cryptocurrencies if you'd rather focus on capital preservation than growth, and there's a possibility that you would sell at the first sign of weakness in your crypto holdings.
If you're a risk-averse investor, you may panic sell at unideal times, leaving you with losses that you could have regained if you stayed invested during that brief price drop. That is exactly why investors with a low tolerance for risks need to keep volatile assets like cryptocurrencies out of their portfolios.
3. Crypto Choices are Influenced by Celebrities or Social Media
Your crypto purchases should not be based entirely on celebrity recommendations or social media posts because if that's the case, you could make a costly mistake.
It's pretty hard to always believe in the advice you hear or read from social media influencers or finfluencers since not all of them are qualified experts in the financial field.
Moreover, some could only be recommending a particular cryptocurrency for promotional purposes or their own personal gain. Even those with good reasons may not have the same investing goals as you.
So unless you know how to look into cryptocurrencies properly to analyze their long-term potential and risks, investing in cryptos may not yet be a wise move to make.
4. Portfolio Needs More Conventional Assets
It's better to invest in cryptocurrencies only if you can afford to lose them and have all your finances in order.
Cryptocurrencies can be very risky due to their highly volatile and speculative nature. Therefore, before you include cryptos in your investment portfolio, it's better to fill it with more conventional assets like stocks and bonds.
That way, you have assets that would keep you on stable grounds during uncertain times and provide you with decent returns, helping you build wealth in the long run, even if your cryptocurrency holdings don't work out well.