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Bitcoin made headlines during 2020 when its value rose by 288 per cent and reached another all high of $40,000 at the beginning of 2021. These are big numbers—and you’re not the only one if you’re interested in cryptocurrencies.
In 2020, 81% of the investment planners studied by Bitwise Asset Management confirmed that their clients had asked about cryptocurrencies. But several analysts agree that their clients will be wise to keep this trend going.
If you want to buy Bitcoin through your stock trading app or exchange, here are a few things to remember before you spend your hard-earned cash what could have been a flash in the pan.
- First, finance your financial targets
A lot of young people are asking a lot of bitcoin questions lately. There has been a huge interest in bitcoin and all things crypto. People want to know more about this crypto craze and make it a part of their investment portfolio.
In general, someone thinking of investing in cryptocurrency should ensure that the basics are protected first. This involves planning for retirement by cranking out your 401(k) or Roth IRA, making sure you pay off any high-interest consumer debt, having a plan to pay off your student loans, and eventually ensuring that you have a three-month emergency fund set aside. If the bases are covered, you can just consider bitcoin as there are numerous reasons to prove that it is the best crypto currency to invest in 2021.
- Develop a balanced portfolio
You probably know that saving is a good way to increase your capital over time. But cryptocurrency is incredibly volatile, so if you want to create wealth that lasts, it’s not the best bet. If your retirement plans are on track or you want to invest in a taxed brokerage account, you should opt for a differentiated portfolio that includes such items as an index and exchange-traded funds.
You might also use a robot-advisor like Betterment to handle your money goals and marketing. Making a quarterly automatic donation and having the AI – powered to do the rest is a good idea.
- Restrict your bitcoin investment to 5% of your portfolio.
In general, it is better to restrict speculative bets, including selected securities, to just 10% of your investments. Since blockchain is even more dangerous, it is advisable to keep it at 5%.
Even though we’re talking about growth companies, we don’t want it to take up even more of a portfolio, But even index funds are much longer in heritage. They’ve got financial capital to validate their value.
- Consider the risks.
While Bitcoin’s value surpassed another all high in the second week of January, it is important to consider its highly speculative and volatile existence.
More and more people began talking about bitcoin when it hit a peak of more than $17,000 in December 2017, only to decline to less than $4,000 a few weeks later. As such, when it comes to bitcoin, just spend your “fun money”—the money you can afford to lose.
Crypto currency is far more like betting than any other form of investment. It can be very exciting when it comes up, but it can crash very easily, so don’t gamble more than you can stand to waste. It has a long way to go before being considered as a mature investment.
