2 reasons to invest in crypto – and 2 reasons not to

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Will 2022 be the year you start investing in cryptocurrency? It really is your call.

But if you have an active investor who has not yet dabbled in the cryptocurrency world, you might feel the pressure to get started. Doing so is a decision that could end up benefiting you – or backfiring. Really, there is no way to know.

In fact, it’s easy to argue that you should buy cryptocurrency, and it’s also easy to argue that it’s a bad choice. Let’s dive into it.

Image source: Getty Images.

Reason # 1 to Buy Cryptocurrency: You Could Make A Lot of Money

Many investors have done well with cryptocurrency, and you might end up having the same experience. In fact, a good bet is to treat your cryptocurrency holdings like money that you can afford to lose and expect to lose.

If you take this attitude and make money, you will be ahead. And if things don’t work out, you won’t take too much of a blow.

Reason 2 to buy: It’s a good way to diversify your portfolio

A diversified portfolio can make it easier to build wealth and can also offer you some protection during times of economic volatility. Adding cryptocurrency to your portfolio could be a good way to diversify, especially if you’re primarily a stock market.

Reason # 1 not to buy: Cryptocurrency is extremely volatile

Stocks are known to be a much more volatile investment choice than bonds. And that is enough to scare some investors. If you’re already uncomfortable with owning stocks, you’ll need to prepare for an even crazier race with cryptocurrency.

It may not match your risk tolerance and comfort zone. If so, there is no reason to push yourself into buying cryptocurrency – not when you can take less relative risk in the stock market.

Reason # 2 not to buy: Its long-term value is questionable

Some of the companies that are publicly traded today have been around for 100 years or more. Cryptocurrency, on the other hand, has only been around for a little over a decade. And because of that, we don’t know how viable this is as a long-term investment.

If regulations break down that make cryptocurrency less tax-attractive, then its value could plunge. And if it fails to become a reasonably common form of currency, a similar thing could happen.

Many people prefer to take a long term approach to investing. But cryptocurrency may not fit very well into this model.

Should you start buying cryptocurrency?

There is money to be made with cryptocurrency, but that doesn’t automatically make it the optimal investment for you. That said, if you want to own a cryptocurrency, start slowly. Invest a small chunk of your money in digital coins and see how you fare and if you are able to sleep at night.

Plus, do your research before you get started. There are thousands of cryptocurrencies to choose from, and the most publicized currencies may not be ideal for your wallet.

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