You’ve definitely already heard countless stories about homegrown millionaires who earned massive amounts of money by simply investing in Bitcoin or Ethereum, or any other cryptocurrency before it rapidly increased in value. While this may have been true for them, is the current cryptocurrency market environment safe for traders to invest? In this article, we’ll try to figure out exactly how safe is investing in cryptocurrencies.
The risks of cryptocurrency
As with all financial instruments, each crypto investment comes with a set of risks that shouldn’t be dismissed because you’re blinded by the opportunity to make profit. Cryptocurrencies are much more volatile than many other traditional securities like forex or shares, and while you can make extremely high returns, you can also lose a lot.
Scams are also popular in the world of cryptocurrencies, with pump and dump schemes and fake ICOs appearing on a daily basis. Be wary of someone overly hyping a crypto projects, as they most likely have their own agenda for doing so – especially influencers who don’t have any credibility behind their financial advice.
Long-term versus short-term investing in crypto
Since the beginnings of cryptocurrencies, people have been arguing whether it’s better to invest in crypto over a short or long term. Truth is, it depends on the asset. Short-term investing is usually more volatile and risky than long-term, especially if you’re trying to make a profit through instruments like futures, CFDs, or shorting. These methods might bring great profits, but their loss potential is also much higher.
Long-term investing, on the other hand, might not see immediate profits, but if you diversify accordingly and keep to a solid investment strategy over a longer period of time, you’re bound to see effects.
What cryptocurrency should you invest in 2022?
There are many interesting opportunities for cryptocurrency investors in 2022. The recent dip in Bitcoin’s value caused many to invest, hoping the tide will turn again after a while. Ethereum is just as promising as ever, now with more projects using the cryptocurrency than ever before. NFT-based coins like ApeCoin have also seen a rise in value, but be careful with those – we’re still not sure whether NFTs are going anywhere or are just a fad that will fade with time.