This post may contain affiliate links, allowing us to earn a commission on the products we would recommend to our families and closest friends. You can find more info on our Legal Stuff page.

Thanks to fellow S&S reader, Jasmine, for providing a few tips on cryptocurrency investing.

Do you have a post or topic to contribute? Contact Us! We love hearing from you.

3 Things You Need To Know Before Investing In Cryptocurrency

In recent years, cryptocurrency has dominated the headlines for two reasons. The first is related to crypto’s ability to potentially replace the conventional banking system as we currently know it. However, the second focus – cryptocurrency as an investment opportunity – has received far more attention.

As a result, even those experienced with investments have found themselves asking whether cryptocurrency investments might be a sensible choice. Especially as the markets look to be picking up pace once more.

If you want to give this type of investing a try for yourself, here are three things you need to know before you dive in…

#1 – Research is its own reward

While it may theoretically be possible to invest in cryptocurrencies without diving deep into the subject, ultimately, research will always stand you in good stead when it comes to making sound investments.

It can be helpful to know a little about how blockchain works, the very specific language and acronyms that tend to surround cryptocurrencies, and the options altcoins such as Dogecoin could offer to you as an investor.

There are plenty of primers online both in video and text form that can help to familiarize yourself with the topic. And if you have any questions, then joining a dedicated forum or subreddit can allow you to access the insight of the community with relative ease.

#2 – Volatility is to be expected

A “hands off” approach is generally required for investing anyway, but such a strategy is particularly crucial when it comes to cryptocurrencies.

Cryptocurrencies can be incredibly volatile – the highs can be very high indeed, the lows can be incredibly low, and the change between these two states can be extremely rapid. As a result, new crypto investors can quickly become spooked when they see the value of their investments drop sharply over the course of a few weeks or even mere hours.

To prevent this, you may find it helpful to simply ignore the day-to-day changes and instead only check-in with your investment every few weeks or so.

#3 – You’ll need to take extra security precautions

Cryptocurrencies are decentralized which is, of course, one of their major advantages.

However, this decentralization means that you have to bear more of the responsibility for the security of your investment because there is no authority with whom you can dispute a transaction. And there is no third-party to compensate you if your funds are stolen. As a result, it’s important to focus on security and, particularly, protecting your investment from hackers.

You’ll need to encrypt data related to your investment (such as crucial wallet backups), effective antivirus software, and enabling two-factor authentication wherever you can. In addition, you’ll also need to think about the device you use. Avoid using your smartphone and, if possible, avoid using Windows in favor of Linux, which is generally considered to be the more secure option.

Remember: Crypto is speculative

Cryptocurrency hasn’t been around long enough to have a proven track record as an investment. Some people have made a whole lot of money on their crypto investments, and some people have lost a lot.

Crypto should be treated as a speculative investment. It’s a big risk that may or may not pay off. Save your crypto investing for the money you can afford to lose.