No matter what your thoughts are about cryptocurrencies, there’s one thing that we know for sure: they’re a hot topic these days.
Bitcoin has been making headlines since it first came out around 2009 and was the only cryptocurrency until 2013 when Litecoin emerged as its competitor.
In 2014, Dogecoin became popular because of the memes on Twitter with links to pictures showing cute dogs or funny captions under them gaining traction on social media sites such as Reddit – which is now another contender in this virtual currency battle royale!
Ethereum also joined forces last year by introducing smart contracts into their system so people can transact without relying solely on trust like traditional transactions do nowadays.
Cryptocurrency is a gamble. Some people are betting big on it while some have steered clear of the unpredictable market entirely, but how do you know which side to take?
Here are top 3 indicators that Bitcoin is not a good investment choice based on experts and common sense:
1. You’re very risk-averse
There’s no such thing as a risk-free investment. Heck, you could put money into a so-called safe investment like bonds only to have your issuer default on its payments. But there’s a general hierarchy of risk when it comes to investing, and while stocks are up there as far as volatility goes, cryptocurrency leads the pack.
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Cryptocurrency hasn’t been around as long as stocks have, and assessing its value is far more difficult than digging into a company’s financials and determining whether its stock price is likely to go up or down over time. Also, a lot of cryptocurrency’s success will hinge on how widely adopted it becomes.
Right now, there are some merchants that accept cryptocurrency as a form of payment, but that’s hardly the norm. And if cryptocurrency doesn’t take off in that regard, its value may wane over time.
This isn’t to say that you can’t or won’t make money with cryptocurrency. But if taking risks in your portfolio isn’t something you normally do, then you may not want to stray from that strategy — even if cryptocurrency is hot right now.Source: fool.com
2. You don’t own a lot of stocks
A diverse portfolio can help you grow wealth and protect you from losses during periods of market volatility. But if you don’t already own a lot of stocks, then you may want to focus on loading up on more of them before putting money into cryptocurrency.
Cryptocurrency can be a good way to diversify, but it’s also more speculative, so if your portfolio right now consists of three tech stocks and one bank stock, Dogecoin, for example, may not be the best addition. Rather, you may want to focus on stocks from other sectors, like healthcare, energy, or automobiles.
3. You don’t understand it
It’s never a good idea to invest in something you don’t understand. And let’s face it — cryptocurrency can be confusing. First of all, its tax rules are complicated, and that alone could be a reason to stay away. Second, it’s hard to pinpoint why cryptocurrency fluctuates in value so much.
Granted, the same could be said for stocks — sometimes, their value can plummet and it’s hard to identify why. But if you don’t understand the technology behind cryptocurrency and the factors that could lead to its value increasing or dropping, then it’s probably wrong for you.
Cryptocurrency may not be for everyone, but it can provide a lucrative investment opportunity. If you have an appetite for risk and the understanding of how cryptocurrency works, then this may just be what your portfolio needs to keep up with its competition.
Otherwise, there are plenty of other investments that might better align with your preferences.