What are cryptocurrencies?
Cryptocurrencies are alternative currencies that enable people to make payments over the internet. They use blockchain technology to provide a secure and transparent way to transfer money.
Blockchains use cryptography to record transactions, providing a transparent way to view and store information without the risk of being tampered with. Cryptocurrencies do not have a central managerial authority, and individuals are empowered to make transactions in a peer-to-peer manner without the involvement of middlemen.
Things to consider before investing in cryptocurrency
Before you begin investing in cryptocurrencies for the long term, remember that this is for your future. Make well-informed, smart decisions all the way.
Evaluate your personal financial goals. Be honest with how much you’re willing to invest from your monthly disposable income, how long you want to invest, and the corpus amount you’re expecting towards the end of your investment. Long-term investing can help you reduce your investment expenses and reinvest possible gains.
The inherent volatility of cryptocurrencies. The crypto market is maturing fast, and, as such, it has a higher volatility than some other asset classes.
Next, fix how much of your portfolio you want to allot to cryptocurrencies. An ideal investment to begin with would be 2-5% of your portfolio. This way, the asset class remains established in your portfolio, although the exposure is kept limited!
Determine your risk profile. Decide how much risk you are willing to take on with your investments. If you are risk neutral, consider investing in blue-chip cryptocurrencies. However, if you’re willing to take more risk, you can consider lower market cap altcoins for your investment. The cryptocurrency market, just like the broader financial markets, is often affected by external factors, including global events, tech advancements, market sentiment, speculations, and changes in the legal landscape.
