Many potential investors have considered the cryptocurrency market to be an extremely promising industry for a long time. When the price of Bitcoin increased by almost 10 times in less than two years – from January 2020 to November 2021 – people did not want to miss the chance to get rich and bought the coin without having any idea what might be waiting for them.
Before investing in digital currencies, they had to ask themselves some questions. But they didn’t and fell victim to the recent market crash. 2023 also promises to be an intriguing year for the cryptocurrency industry. So, if you want to benefit from it, answer the following questions before making any investment.
Do you have a reserve budget?
While cryptocurrency prices dropped drastically in 2022, many experts believe that they will gradually return to their previous level. If you agree with them and expect to make a long-term profit, you still need to be prepared for unforeseen circumstances and have a contingency budget. To survive the unexpected drop in the price of the coin you invested in, you better have enough money to cover your expenses for at least 3 months.
How long are you willing to wait for results?
Most novice investors come to this market to make a quick profit through short-term price changes. But if you are willing to wait for a few or even up to 10 years, you will have the opportunity to understand the cryptocurrency niche much better. Therefore, you will be able to analyze the crypto market more efficiently and make more informed decisions.
Will cryptocurrencies be one of several sources of income for you?
Even the most enthusiastic crypto fans will admit that this is a risky industry that is not even regulated by most countries. Given this, they recommend diversifying your investments and never going all in on digital currencies. These experts believe that cryptocurrencies should cover no more than 5% of your investments. In this case, you will be able to get a feel for the industry without significant risks and make relatively good profits if the market rises.
Do you have a plan?
People tend to invest in crypto in a chaotic way, without understanding the specifics of the industry. That is why you should approach this market seriously and come up with a plan. How much money are you planning to spend on this endeavor? What currencies would you like to invest in? How long will you keep coins before selling them? On top of that, consider whether you really believe in blockchain technology. When you answer these questions and stick to the plan, it will be much easier for you to avoid panic decisions.
Do you understand the risky nature of crypto investments?
Considering that the cryptocurrency market is extremely volatile and individual coins can fail, you better think twice before joining this industry. In addition, various platforms and crypto exchanges that may turn out to be scams are also a negative factor. At the same time, if you understand how to protect yourself from possible risks and, for example, store funds in a crypto wallet instead of an exchange, digital coins can become a life-improving investment direction for you.
