Is Digital Currency a Good Investment?

Should I Invest in Cryptocurrency?
By 
Coin Cloud Team
, published on 
April 12, 2021
Is Digital Currency a Good Investment?

When you hear about people making tons of money with digital currency, it’s normal to wonder whether it’s a good investment for you as well.

“The first step to successful investing is figuring out your goals and risk tolerance – either on your own or with the help of a financial professional,” advises the U.S. Securities and Exchange Commission (SEC).  “There is no guarantee that you’ll make money from your investments.”

And that goes for all investments, not just digital currencies. The rule of thumb, as always, is never to invest more than you can afford to lose. Just in case you lose. And if you profit, well … bonus. Ka-ching!

Here are 5 ways to determine the best investment possibilities for you.

1. Investigation

Before investing in a digital currency, determine your personal risk profile by investigating your thoughts and emotions around it. Do you prefer working alone or with a financial advisor? Are you risk-averse or go for the highest reward? Most digital currencies tend to be quite risky due to their volatility, which could mean greater profit, but also could spell a bigger loss. Stablecoins, which are pegged to another currency (commonly USD), are much less volatile — hence the name — but also present a lower potential payout.

How you deal with risk vs. reward and how you like to research and make decisions is going to have a big impact on the types of investments you choose, whether digital currencies or otherwise.

2. Education

You probably shouldn’t just randomly buy any digital currency for arbitrary reasons (like a cute mascot or cool-looking logo). But any digital currency could potentially be a good investment for you, if you take the time to research and understand it. Education is your best friend when investing, especially if the industry is relatively new and widely misunderstood.

To study digital currency topics, take a look at blogs (like this one), forums, informational websites, YouTube channels, podcasts and more. The cryptocurrency space has lots of great information created by passionate people who want to share their knowledge.

3. Diversification

Many financial experts advise against putting all your eggs in one basket, which is also known as diversifying your investments. This sage guideline refers to both the asset categories (stocks, bonds, mutual funds, digital currencies, etc.) and the assets within each category (Ethereum and USD Coin in addition to Bitcoin, for example).

So rather than just investing in one digital currency because Elon Musk tweeted about it or your cousin said he made money off it, take a look at a range of different coins to keep in your portfolio … which hopefully involves other investments as well.

4. Skepticism

Keep a healthy dose of skepticism, especially when investing in a new technology (like digital currency) or an asset class that attracts scammers (like digital currency). Hmmm … sounds like we need to be careful when investing in digital currency!

Bitcoin and other digital currencies are attractive to scammers because they consider them somewhat anonymous, transactions can’t be reversed, and the most important piece: people don’t understand them enough. You can counteract this trend by being extremely careful, vetting all opportunities, and learning as much as you can (this blog is a great start).

5. Emergency Funds

Nearly everyone will tell you it’s a good idea to keep six months’ worth of expenses in an emergency fund. Or at least enough to cover you if you lose your income and have a large expenditure come up. It’s also prudent to pay off high-interest credit card debt, which is basically a guaranteed loss … and therefore not good investment strategy!

Never invest your last dime, and don’t leave yourself in an awkward or dangerous financial situation. If you approach this with both your mind and eyes open, and make decisions with your head instead of your emotions, digital currency could well be a good investment for you. But only you (or your financial planner) can say for sure.

Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.

What is Coin Cloud?

Founded in 2014 in Las Vegas, Nevada, Coin Cloud is the leading digital currency machine (DCM) operator. With over 4,500 locations nationwide, in 48 states and Brazil, Coin Cloud operates the world’s largest and fastest-growing network of 100% two-way DCMs, a more advanced version of the Bitcoin ATM. Every Coin Cloud DCM empowers you to quickly and easily buy and sell over 40 cryptocurrency options with cash.

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