The cryptocurrency market has been “running” for years, but during the pandemic it accelerated even more. Cryptocurrencies, and especially Bitcoin, are increasingly seen as investment products against inflation or in times of economic uncertainty, much like gold. And the financial aid given during the pandemic gave many Americans extra investment funds.
In 2020, the bitcoin investor market grew to 32 million people in the United States, a 52% increase over the previous year. A survey of people who bought the cryptocurrency over the past four months found that the pandemic contributed to their decision.
However, with regard to new investors, experts stress that caution is needed.
Which cryptocurrency to buy?
There is a wide variety of online currencies and designs in which to invest. If you are new to this “game”, it is best – according to experts – to invest in currencies that are well-established and well-known in the market, such as Bitcoin and Ethereum. Although their prices continue to fluctuate, the regulatory framework governing them is clearer than other cryptocurrencies, which means that the risks are mitigated.
Also, bitcoin is the most common cryptocurrency, which means that it is easier for investors to buy and sell it compared to other smaller currencies with less demand.
How do you buy it?
Digital wallets that allow someone to have cryptocurrencies without the help of an intermediary are not always secure and from time to time there have been code leaks – while some have lost their money.
You should also be aware that platforms often have higher commissions for buying and selling cryptocurrencies than buying and selling stocks.
Risks of investing in cryptos
On the other hand, the price of a cryptocurrency is not based on something tangible and specific, as is the case with stocks whose prices fluctuate based on the results and prospects of a company.
For this reason, experts suggest that you invest a small portion of your investment capital in cryptocurrencies.
Certainly, it is an investment much more risky than other markets – stocks or bonds, for example. Some experts argue that for the average investor with a few thousand euros, cryptocurrency may not be the best idea.