If you follow the news, chances are that you’ve seen stories on cryptocurrency and just how popular it has become. Tokens like Bitcoin are in new all-time highs, the number of active crypto wallets has only continued to increase, and more tokens are being introduced to the market all the time.
For anyone considering crypto, the important question is how much to put into the market. After all, there are a lot of stories of people making millions from their crypto investment and a newbie might be confused about what is too much and what is too little.
In this article, I’ll discuss some important points that will help you understand how much you should invest in this currency.
Things to Consider Before Investment
Crypto investment is very complicated. It’s not like investing in any other field where you don’t have to consider a lot of important factors. In this investment field, you need to consider a few important points before you make an investment. I’ve mentioned the main ones below:
1. Token Growth Potential
One factor that guides many crypto investors’ decision-making is the growth potential of specific tokens. Some people have invested in certain tokens in the early stages and gone on to make a lot of profit from them.
Take the meme coin market, for example. Meme coins have been some of the most profitable cryptos in the last few years and many choose to put a lot of money into the newer ones because they believe in their potential. If you do your research on a token and it delivers a certain amount of returns, this will have chances of usage to guide the amount of money you put in.
2. Loss Potential
As with any other form of investing, you are should always invest an amount you are capable of losing comfortably. No crypto investment, no matter how promising, is you have, and there’s always the chance that all your money will be lost.
Ask yourself how much you can let go of without losing almost everything. There have been instances of people using their life savings or retirement funds to invest in different assets and losing it all. You do not want that to be you so make sure the amount you invest has chances of loss.
3. Diversification
Another golden rule of investment is to always diversify your assets. You don’t want to put all of your money in a single token as there is a chance this will accrue a loss. Instead, you want to make sure your money is spread across several different crypto assets.
Decide how many tokens you want to put your money into and this can guide your decision on the amount to invest.
If you decide you want to invest in three different tokens, for example, you need a certain amount to make a decent amount in each of them. As you do this, strike a balance between having enough tokens that you have diversity and not so many tokens that your funds are only a few.
4. Long-Term Investment Goals
Ideally, as a crypto investor, you should have long-term goals about how you want to invest in the market. You could decide that you want to invest over the next decade or have a certain number of tokens in your portfolio. With this in mind, you can plan to invest a certain amount regularly or put a lump sum into crypto.
Ask yourself what you want your crypto portfolio to look like in the next year of 5 years and divide that on a yearly or monthly basis. This will inform how much you will need to invest in each token to reach your goal.
How Much You Should Invest in Crypto?
Well, after considering the above-mentioned points, the real question begins which is, “how much you should invest in this currency?”. The straightforward answer is that you should invest as much money as you comfortably can without losing all of your savings and wealth. We all know that crypto is a volatile market and it can bring both benefits and losses.
However, if you’re well-aware of the market and have a lot of money to spend, I encourage you do it. Understand the market fully and then invest in any coin you think is profitable for you. While you’re trading, keep an eye on your personal savings. If you think that you’re investing too much, put a brake on the investment and have some time to figure your your next move.
Is Crypto a Worthy Investment?
As you consider the amount of money to put into cryptocurrency, you might also wonder whether the asset class is a worthy investment at all. The truth is that crypto has proven to be a good investment, with Bitcoin even being one of the highest-performing assets of the 2010s, beating out gold.
At the same time, cryptocurrency carries as much risk as any other asset class. Just as there is a risk in investing in real estate, stock, or any other traditional financial instrument, there is a risk of loss within cryptocurrency.
Final Verdicts
Before you begin your journey of investing in cryptocurrency, you should be well aware of how much you plan to put in. Making this decision ahead of time will stop you from overspending or trying to have resources across too many tokens.
As I’ve pointed out in this article, the appropriate amount to invest depends on your situation, your long-term crypto investment plans, and so on. Taking all these into account will make your journey into cryptocurrency much easier and likely more profitable.
