Understanding The Risks Before Investing In Crypto

The rise of cryptocurrencies has changed the world, from the way we can send funds overseas in seconds instead of waiting days and weeks, to delivering strong life-changing returns for investors. Investing in crypto can be a good way to hedge in the current economic and political climate. 

Since the inception of Bitcoin and Ethereum, these two cryptocurrencies have delivered over a 1,000,000% in ROI. Such has been the rate of adoption that institutional and retail investors have turned their attention to the crypto market to grow and preserve their wealth, diversify and manage risk. Navigating the crypto market on your own may be daunting. Retail investors have started building portfolios in the cryptocurrency market through various platforms and investment services. There are various reasons to choose that approach and they have to do with the nature of these digital assets. 

Companies that provide professionally managed investment portfolios in the cryptocurrency market are a good place to start when investing in crypto. Having the necessary background to make an informed decision when it comes to investing in new technology is also very beneficial. But not every investor has the time and ability to learn about and research cryptocurrencies, market trends, regulatory frameworks surrounding digital assets, and other contributing factors. 

Many start following YouTube or Telegram channels promising good returns with automated signals and strategies. Unfortunately, there is no ‘get rich quick, formula, and most people investing in crypto in this way end up losing a big chunk of their money. 

For this reason, some investors prefer to partner with companies such as us at Wealth And Loyalty that have the experience and expertise to help protect their money from the various risks that come with investing in cryptocurrencies.

What are the Risks of Investing in Crypto?

Most people don’t think about the risks associated with investing. However, the reality is that investing in stocks, property, and even crypto can be risky if you don’t know what you’re doing.

It’s like anything in life, if you don’t have a plan, if you don’t have experience and expertise, it’s not going to end well:

For example, someone could offer you to fly the safest plane in the world… but if you don’t have any experience flying a plane, it’s not going to end well.

The same is true in the investment world… you can invest in the best stocks or in the best cryptos in the world… but it doesn’t mean you will make money, you need to know what you’re doing, you need the skillset, or you partner with someone who can invest your capital for you, such as an investment firm.

There are risks associated with investing in cryptocurrencies. For example: being hacked, mostly via the online exchanges they invest on. Always make sure you have an offline wallet if you are going to invest by yourself. Please study how to use an offline wallet if you go down this route. 

Another risk that investors should be aware of is the volatility of the price of cryptocurrencies. This is significantly higher than other traditional investments such as property and shares, and with that comes far larger returns on investment, yes it goes up and down more than stocks but over the long term, which your investment style should be anyway… this makes no difference other than far greater returns than stocks for example. 

We want to be clear; the volatility is a risk for new and inexperienced investors but is a blessing for us, being very experienced and professional investors, the volatility offers us and our clients very large returns, this is partly the reason why we invest in crypto over stocks. 

The volatility in crypto is mainly caused due to the small market cap size, meaning a smaller amount of capital is in the crypto market, currently, around $1 trillion dollars is in crypto, whereas with stocks the market size is around $90 trillion dollars and the real estate market $200 trillion + the largest market being the derivatives market a $1 quadrillion + market. In general, the lower the market size of a market, the more volatile it is e.g., the more growth opportunities there are for your capital. 

Is Crypto a Safe Investment?

It all comes down to whether you are an experienced investor in the cryptocurrency market, and whether you understand cryptocurrency and know how to trade and invest in general. 

Long-term investing is the safest way to approach any investment and that is how we invest at Wealth And Loyalty.

Due to the limited supply of major cryptocurrencies such as Bitcoin, the potential for significant upside is expected to continue in the coming years. 

Before investing in the crypto market, it’s important to understand one of the most important factors that investors should consider is their approach to investing, if you think you will be able to make money with no investing experience, by following someone’s advice to cryptocurrency investing on YouTube from their mother’s basement, then it’s not going to end well!

Despite the various risks that investors should be aware of, there are plenty of life-changing opportunities in the crypto market, if you have the necessary support and are comfortable with the long-term, safe, and steady approach to investing.