A “crypto-crash” this past year has shaken millions of investors. Some lost all of their hard-earned savings, including a substantial portion of their life savings. The crash impacted black Americans especially hard because they are much less likely to have the kind of money to invest in cryptocurrency. While 25% of black Americans own cryptocurrencies, the number is even higher among young African-Americans. Two-fifths of African-Americans under 40 are cryptocurrency owners compared to just 29% of white Americans.
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Why people invest in crypto
The decentralized nature of cryptocurrencies is what makes them so exciting. Many investors lost trust in banks following the 2008-09 financial crisis. However, the monetary value of cryptocurrencies is limited, and the prices will rise in the long term. Moreover, the market cap of cryptocurrencies will only increase as long as there is a long-term use case. Here are some reasons why people invest in crypto:
Because of the limited supply of cryptocurrencies, they can be reliable long-term stores of value. Most cryptocurrencies are cryptographic, making it impossible for the government and political bodies to dilute their value. Further, government and political agencies cannot confiscate or tax them. This is why so many people have started investing in crypto. To invest in cryptocurrencies, you must know why you are doing it. To understand why people invest in crypto, read on!
Volatility
The Volatility of Cryptocurrencies is a key factor to consider when trading cryptocurrencies. While this type of currency has no physical form, the volatility is high. In addition to this, the market experiences fluctuation due to human emotions, as people tend to invest their money in cryptocurrencies because they believe they will make a profit. However, these emotions are based on a flawed premise. For this reason, investors should carefully analyze their risk tolerance before investing in cryptocurrencies.
Markets in traditional asset classes exhibit increased volatility due to speculation and news developments. In contrast, the crypto market lacks a mature ecosystem of large trading firms and institutional investors. Lack of liquidity causes these price swings to be exaggerated. Until this new ecosystem is fully developed, volatility will likely remain outsized. While there are signs of decreasing volatility, investors should continue to monitor market activity closely. A high standard deviation indicates higher volatility.
Investing based on emotions
It is important to avoid investing based on your emotions when investing in cryptocurrency. Many investors cannot resist the urge to buy at a high price and sell at a low one. This is because they are triggered by the noise that surrounds investment opportunities. Fortunately, there are ways to avoid these impulses and make wise decisions. Here are some of them:
Investing based on emotion can cause poor financial decisions, hindering your long-term goals. It’s important to stick to a plan and stick to it. You should have short-term, medium-term, and long-term objectives for your investment and a list of coins that you’d like to purchase gradually. Depending on your time frame, you could invest in BTC, ETH, MATIC, ADA, or ENJ.
Taxes
Three out of ten U.S. adults have ever invested in or traded cryptocurrency, depending on who you ask. Men are twice as likely as women to say they have heard of crypto somehow. The likelihood of investing in crypto decreases as you get older, but it remains a relatively small minority. However, there are plenty of ways to get involved in crypto for the time being. Read on to learn about the top ways to get involved.
A recent survey found that 11% of U.S. adults are now investing in cryptocurrency, making it one of the hottest investments. However, not everyone is as excited as others about buying digital coins. Men are more likely to invest in crypto than women are, with 16% of men and seven percent of women already owning cryptocurrencies. However, if you could store your crypto in a bank account, more than seven out of ten people would be interested in investing in crypto.
401(k) providers
More companies are starting to offer crypto as 401(k) investments. Fidelity Investments is the latest to join the club. It will soon make the cryptocurrency available to 23,000 employers in the U.S., which could pave the way for mainstream technology adoption. More than $11.3 trillion is currently held in fidelity’s retirement plans, so that the decision could bring crypto into the mainstream.
Cryptocurrency investments are not for everyone, and the U.S. government has urged investors not to put their retirement savings in these investments. They may not understand the volatility of virtual currencies, which are highly volatile. The S&P 500 has only experienced two 10-percent drops in 50 years. On the other hand, Bitcoin is subject to debate about its value. The Labor Department warns that investors should avoid investing in crypto.
Investing based on knowledge
Before investing in cryptocurrencies, make sure that you understand the investment case. Like you would if you were buying stocks, you must thoroughly research the company you’re interested in. It would help if you also considered that there are thousands of cryptocurrencies in existence, with new ones appearing daily. This can make it difficult to determine which ones are worth investing in. To prevent yourself from losing money on an unsound investment, you should seek the advice of a financial advisor.
While it can be very profitable to invest in cryptocurrencies, many risks are also. You should keep an eye on market regulation and look for opportunities that might fade away. Moreover, it would be best to exercise caution when choosing which cryptos to invest in. While some ICOs offer enormous payouts, it’s best to buy well-established crypto to ensure steady value growth. To do so, you should research the ICOs thoroughly before making your decision.
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