Consider buying crypto in 2023? Answer these questions honestly first

You might be new to the crypto market, but you definitely know the news about it because the buzz around the sector probably charmed you into considering investing in digital currencies. Cryptocurrency investments skyrocketed in 2020 and 2021, and several digital coins hit all-time highs during this period. The oldest cryptocurrency, Bitcoin, soared from $7,000 in January 2020 to $68,000 in November 2021. 

Crypto prices began to fall when the pandemic hit, and the Fed introduced a series of economic tightening measures that caused investors to pull away some of their funds from risky assets like digital currencies. Since the end of 2021 until now the market has registered several shocks, and the assets’ prices have plummeted. However, bitcoin price usd didn’t collapse as others like Terra did. Even if the market continues to be in a bear phase, investors hope the worst is over and are ready to add cryptocurrencies to their portfolios again.

If you want to join the trend, here are some questions to answer to ensure it’s the best decision.

Why do I invest in crypto?

If you buy or mine cryptocurrencies, do it for the right reasons. What motivates you to join the sector? Do you invest in digital currencies because you believe in blockchain technology and think it has great long-term potential? Will investing in cryptocurrencies enable you to boost your profit?

The most successful investors believe in blockchain technology’s potential. They follow the crypto projects with the greatest potential and follow their developers on Twitter and specialised platforms to stay up to date with the latest news and trends. The crypto market is unpredictable, and it’s crucial to anticipate the market’s movements to stay at the top of the game.

Suppose you’re a savvy investor, study the projects’ white papers and road maps to figure out which digital currency could help you reach your goals. If you think the demand for a particular crypto will increase in the following years, it’s worth your attention.

How much do I afford to lose?

Digital currencies are volatile, and investors label them as high-risk investments. The risk associated with investing in this sector is so high that some credit card issuers don’t allow their clients to buy digital coins with their credit cards. As a first-time crypto investor, it’s best to rely on the savings you have at hand to invest in crypto.

The prices go up and down pretty rapidly in the market, and it’s best to be prepared to lose some of your investment. Remember this when you consider how much you put into cryptocurrencies. Suppose you’re investing a large sum; spread it out over multiple crypto projects to limit the risk. Also, it’s paramount never to spend more than you afford to lose because the market is still young, and it can crash overnight. 

Do I have an exit strategy?

Buying cryptocurrencies is easy, but selling some of them might prove challenging. When the time comes to get rid of some of the digital coins in your portfolio, you might find it more difficult than expected. Therefore, creating an exit strategy or a plan to cash out your investment is essential. Develop this strategy before making an investment, and keep in mind that the costs of digital coins fluctuate wildly.

Suppose your goal is to invest in some crypto projects and hold onto them long term, then your exit strategy is simple: you sell the assets when the price is high enough that you make the aimed profit. In case you prefer speculative trading, your exit plans might be trickier because you need to sell quickly when the market shows signs of going down.

Each exit strategy has advantages and disadvantages, so you must identify the best matches your trading style and goals.

What crypto do I want to invest in?

Finding the ideal crypto to add to your portfolio can be very daunting because you lack experience in the sector. Identifying the right project to invest in is also challenging due to the market’s volatility and unpredictability. But there are some things you can do to make an informed decision before putting your funds into a digital asset. The first step is to check the crypto’s whitepaper to ensure that the project has utility and brings something new to the market. Then you should research the developers to find out if they have experience in the market. And last but not least, get in touch with the project’s supporters to find out why they’re enthusiastic about the digital currency.

How can I set some smart crypto goals?

Setting investment goals is something you should do regardless of the asset class you add to your portfolio, not just cryptos. Your investment goals are the goals you want to achieve by putting your money into this asset. Each individual has unique aims that range from earning profit to boosting their monthly income to funding their children’s college. The list of reasons people choose to invest in a crypto is endless.

When setting your goals, keep in mind that digital currencies are completely different animals than other assets.

What investment strategy do I prefer?

Once you identify the project or projects you want to invest in, set the amount of money you can put at play, and set your smart crypto goals, you can consider the investment strategy that suits your investing style. You can pick between different approaches depending on why you buy cryptocurrencies (as a speculative bet or investment).

As an investor, you buy assets intending to hold onto their position for a determined period. When it comes to buying a new category of assets like crypto, you must believe in the underlying technology and think the assets’ value will rise over the years. As a speculator, you try to make quick profits from market movements. You buy assets when their prices are low and sell them when their value increases.

Not everyone can be a crypto investor

You might be more risk-averse than other investors, and you should take the time and patience to figure out how the crypto market functions.

Huynh Nguyen

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