Five Things to Know About Investing in Crypto

Sponsored by What's this?

In the span of just a few years, cryptocurrencies have grown from digital novelties to trillion-dollar technologies with the potential to alter the global financial system for years to come. This trend is especially true for young investors. In fact, a survey conducted by NORC at the University of Chicago found that the majority of crypto investors are under 40.

With their growing popularity, Bitcoin and other cryptocurrencies are considered to be notable investments. Below, we highlight the five most significant things to know about investing in crypto, and share tips on how new and seasoned investors alike can get started.

Cryptocurrencies Are Growing in Popularity

Investing in cryptocurrency has experienced significant growth over the past two years as roughly 61% of investors started investing in crypto between 2020 and 2021. The NORC survey also revealed that 26% of investors get their cryptocurrency investing information mostly through the crypto exchanges themselves, suggesting that they are learning about the currencies while actively investing.

As cryptocurrencies continue to gain traction, they are becoming an increasingly popular addition to investor portfolios. What’s more, there’s been an increase in the number of retail and well-known institutional investors that have added digital assets to their portfolios, helping to increase visibility and trust for this asset class.

Experts Are Increasingly Recommending Crypto Investments

Many experts have chimed in on the cryptocurrency discussion by offering insights on when and how to incorporate crypto into a portfolio, should you decide to do so.

Recommendations from financial experts include knowing your individual risk tolerance, being aware of your short- and long-term goals, and having a clear strategy in place. As with any other investment, it’s important to also consider your overall allocations and how crypto may fit into your current asset mix. 

Cryptocurrencies Can Be a Powerful Addition to a Diversified Portfolio 

With new currencies and digital assets entering the market, cryptocurrencies are increasingly becoming a part of many diversified portfolios. And since crypto markets largely function independently of other markets, their price action is often determined by factors other than those affecting stocks, bonds, and commodities.

With that in mind, investors who can tolerate volatility may want to consider an allocation to some form of cryptocurrency in their portfolios. Many experts recommend allocating anywhere from 1% to 5% to alternative investments such as cryptocurrencies, and finding your ideal allocation will depend on your unique investment goals.

Investing in Cryptocurrencies Carries a Certain Level of Risk

Due to high levels of volatility, the cryptocurrency market naturally carries a certain level of risk, and price vacillations are common. For example, between September 2021 and January 2022, the price of Bitcoin rose from approximately $41,000 to $61,000 and then fell back down to around $38,000. Before you start investing in crypto, you should outline your appetite for risk and implement a durable risk management strategy.

While cryptocurrencies are risky, they also have the potential to offer outsized returns. When Bitcoin began in 2009, the digital currency essentially had very little value. In the years that follow, it would jump to a fraction of a penny and then eventually to tens of thousands of dollars. Gains like these might be among the most significant benefits of investing in cryptocurrency.

A Robust Trading Platform Can Help You Make the Most of Your Investments

Making the most of your investments is easier than you think when you have the right trading platform. Amid the growing popularity of crypto investing, many investors are seeking a more simplified way of trading a variety of digital assets. 

The FTX trading platform provides the easiest way to start trading crypto—and it’s free. The U.S.-based and regulated platform lets you join some of the biggest names, like Tom Brady and Stephen Curry, and trade new and popular cryptocurrencies with fees up to 85% lower than competitors. You’ll also be able to get a free coin with every trade over $10. One additional benefit is that you can sign up and start trading in as little as three minutes.

As cryptocurrencies continue to gain attention, Americans of all ages are becoming more interested in learning about these unique assets. Whether you’re just getting started, a seasoned investor, or teaching your teen or young adult child about investing, having a firm foundational knowledge of crypto will stand you in good stead.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Norc.org. "More Than One in Ten Americans Surveyed Invest in Cryptocurrencies, https://www.norc.org/NewsEventsPublications/PressReleases/Pages/more-than-one-in-ten-americans-surveyed-invest-in-cryptocurrencies.aspx

  2. Ibid

  3. Time. "Curious About Crypto? What 10 Financial Advisors Are Telling Clients About Investing in It, https://time.com/nextadvisor/investing/cryptocurrency/how-financial-experts-advise-clients-on-crypto/."

  4. Statista. “Bitcoin price history 2013-2022, https://www.statista.com/statistics/326707/bitcoin-price-index/.”