Buying crypto in 2022? Do this first

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Have you been swept away by the cryptocurrency hype in 2021? If you haven’t, you may be considering investing now. It’s not too late to reap big rewards with Bitcoin, Ethereum, or any of the “altcoins,” including Doge, but crypto investing is not without its risks.

See: 5 Things Most Americans Don’t Know About Crypto Investing.

It’s important to understand what you’re getting yourself into before investing in cryptocurrency – or any other high-risk investment, like meme stocks, for that matter.

Follow these steps to make sure you’re making the right choices for a strong financial future, not just gambling with your money.

1: Assess your current financial situation

First, can you afford to put money into crypto? Given that nearly a quarter of American workers say they have no retirement plan and no idea how they’ll cover their expenses once they stop working, it’s wise to think about your other investment needs.

Plus, are you paying off high-interest debt? Take care of the debt first or you will see your crypto earnings evaporate along with the interest you pay credit card companies.

Finally, make sure you have at least three months of easy-to-access emergency savings. In an emergency, you could potentially sell your crypto investments, but that might not be the wisest financial choice. On the flip side, there is also the potential of losing your crypto investment. Online savings accounts offer returns as high as 0.6% or more, and you can get your money fast in an emergency.

Related: 11 Best Cryptocurrency Stocks To Invest In

2: Create your investment strategy

Find out your “why” when it comes to crypto. Do you want to buy now and sell at the first peak to make your investment profitable? Do you plan to hold coins as part of your retirement investment strategy? Keep in mind that the tax laws surrounding crypto could change in the near future, so holding onto it for long-term gains might be a better bet if that happens.

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On the other hand, no one is certain about the future of crypto. As with any investment, it should be part of a diversified portfolio if you are saving for something as important as retirement.

Find out: there is a new free service to compile tax data to report cryptos and NFTs

3: Determine the “how” and the “where”

Buying and selling crypto is a bit different from trading stocks due to the technology involved. If you are dealing with large sums of money, you might want to consider “cold storage,” a digital wallet that stores your crypto on a physical hard drive rather than in the cloud. If you choose this option, make sure you don’t lose your password as these hard drives are virtually impossible to hack. You can’t just click a “reset my password” button to gain access.

Otherwise, you’ll want to select a reputable, secure crypto exchange with low transaction fees and transactions in the digital currency you wish to purchase.

Services like PayPal and Venmo now allow you to purchase crypto through their service, but options are limited to a few of the more well-known coins, including Bitcoin, Bitcoin Lite, and Ethereum. For broader choices, check out exchanges like Coinbase.

4: Choose your crypto

The last question remains: what to buy?

While established currencies like Bitcoin and ETH may carry less risk, altcoins may offer better short-term returns.

“Altcoins provide an opportunity in that they have a much higher percentage gain advantage,” CoinFlip COO Ben Weiss told US News and World Report. He pointed out that many altcoins carry higher risk as well, as many are here today and gone tomorrow.

You can choose an altcoin because its value proposition matches your personal philosophy or because it has always worked well. Weiss advises doing your due diligence before undertaking any investment, but especially with something as new and experimental as altcoins. “A worthwhile altcoin to invest in should provide a service that you believe is unique to that particular token,” he told US News.

Learn: 6 Cryptocurrencies That Could Be Great Investments in 2022 – How Much They’ll Cost You NowExplore: Cryptocurrencies Promising for 2022

Take a look at some of the altcoins with both stamina and higher market caps. Some altcoins, like Doge, are starting to gain credibility in the market. For example, Dogecoin jumped 15% when Tesla CEO Elon Musk announced that the electric vehicle maker would only accept Doge for the purchase of a few fancy items from its online store.

On the other hand, if you are looking for an easily accessible coin that you can hold onto for the long term, Bitcoin and ETH are worth exploring.

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This article originally appeared on GOBankingRates.com: Buy Crypto in 2022? Do this first

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