Is cryptocurrency a good investment? What are the investment skills of encryption projects?

Dec 29,2022
Is cryptocurrency a good investment? What are the investment skills of encryption projects?

Cryptocurrency is a relatively high-risk investment from any perspective. There are other ways to manage the risks in your crypto portfolio, such as diversifying the range of cryptocurrencies you buy. Cryptographic assets may rise and fall at different speeds in different periods of time, so by investing in several different products, you can protect yourself from the loss of one of these assets to some extent.

Cryptocurrency (or "crypto") is a kind of digital assets, including Bitcoin, Ethereum and Tether. The name of cryptocurrencies comes from the encryption technology that enables people to buy, sell or trade them securely. Unlike traditional fiat currencies controlled by national governments, cryptocurrencies can circulate without monetary authorities such as central banks.

Usually, when investing in anything, the most important thing is to do your homework well. This is particularly important for cryptocurrencies, which are often associated with specific technology products being developed or launched. When you buy a stock, it is linked to a company that complies with clear financial reporting requirements, which can give you some insight into its prospects.

On the other hand, cryptocurrencies are more loosely regulated in some countries, so it may be more challenging to identify which projects are feasible. If you have a financial advisor who is familiar with cryptocurrencies, you may need to ask.

For novice investors, it is also worthwhile to investigate the scope of use of cryptocurrencies. Most famous encryption projects have publicly available indicators to display data, such as how many transactions have been made on their platforms. If cryptocurrency is used more and more, this may be a sign that it has a firm foothold in the market. Cryptocurrencies often also publish "white papers" explaining how they work and how they intend to distribute tokens.

If you plan to invest in less mature encryption products, here are some additional issues to consider:

1. Who is in charge of this project? An identifiable and well-known leader is a positive sign.

2. Are there any other major investors investing? If other well-known investors want a piece of the cake, this is a good sign.

3. Will you own part of the company or just currency or tokens? This distinction is important. Being a partial owner means

4. You can share its profits (you are the owner), and buying tokens only means that you have the right to use them, just like the chips in the casino.

5. Has the currency been developed, or is the company seeking financing to develop it? The deeper the product, the smaller the risk.

It may take a lot of work to sort out a prospectus; The more detailed it is, the more likely it is legal. But even legitimacy does not mean that money will succeed. This is a completely different problem and requires a lot of market knowledge. It is recommended that you consider in detail how to protect yourself from fraudsters who view cryptocurrency as an opportunity to defraud investors.


Generally speaking, high-risk investments should account for a small part of your entire portfolio. A common guideline is no more than 10%. You may want to increase your retirement savings, pay off debt, or invest in a less volatile fund consisting of stocks and bonds. It is important to remember that Bitcoin is different from ordinary cryptocurrencies. Although Bitcoin is the first and most valuable cryptocurrency, the market is large.