When you invest in cryptocurrencies, realize you’re also investing in everything that comes with that asset class. That includes skepticism from mainstream media, criticism from holders of competing investments, whipsaw volatility swings, complex technology, regulatory threats and government bans, even ecological concerns. And there are ordinary, personal fears, uncertainty, and doubt. Crypto holders affectionately call all the fear, uncertainty, and doubt about investing FUD for short.
Of all those issues that keep people from buying into crypto, two stand out in particular.
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Bakkt is an asset platform offering trading and storage for a range of digital assets for consumer and institutional investors. Its recently published U.S. Consumer Crypto Survey of more than 2,000 U.S. consumers explored perceptions and behaviors of everyday investors regarding cryptos and digital assets. According to the research, the main barrier to buying Bitcoin, or any cryptocurrency, was “too much volatility” within this asset class — 32% of respondents said that was their primary obstacle.
While this is a legitimate concern, here are some things to consider to help overcome this particular issue.
- High volatility is not unique to crypto. There are several asset classes that have comparable market swings to those that occur with crypto, including: commodities, futures contracts, and speculative bonds. Remember, with higher risk comes higher reward, and there is no investment that is 100% risk-free. Even gold, real estate, and triple-A rated bonds have a degree of risk and valuation swings.
- Unless you’re an experienced daytrader, you don’t have to react to the fast ups and downs that occur with cryptocurrencies. It’s critical to understand your long-term investment goals, make a plan, and stick to it. Just because the crypto market swings up or down doesn’t mean you have to respond in kind. You don’t incur an actual loss until you dispose of your assets. So when things cycle down — as they will — just continue to hold your cryptos, or “hodl” (rhymes with throttle). As we crypto nerds like to say, “Keep Calm and Hodl On.” As with the stock market, don’t look at daily gyrations — zoom out for the wide view.
- Only invest an amount that you can comfortably afford to risk — start small. Do not take out a loan, credit card debt, or a second mortgage to invest. It can be useful to dollar cost average into cryptos a little at a time to build your comfort and confidence.
- Practice with a demo account — several digital exchanges allow you to set up an account with “fake” funds so you can practice making trades. It’s a great way to learn with no risk.
Knowing where to start
The second most cited reason for not buying cryptocurrencies was “not knowing where to start,” expressed by 24% of respondents. This is another bona fide issue for the crypto curious, especially when you consider the complexity of navigating digital exchanges, selecting a digital wallet, and linking that wallet to your accounts — not to mention picking the right crypto for your investment goals.
Luckily, there are some excellent resources to help you get started on your cryptocurrency educational journey. Two of the best repositories for crypto ed are free.
The first is the Crypto Explainer portal at Coindesk. Each of its topical areas has learning modules for beginner, intermediate, and expert training. The second resource is the Coin Bureau video channel on YouTube. It’s been a trusted resource for years within the crypto space, with 1.4 million subscribers. It has a library of more than 400 videos covering virtually every topic within the cryptosphere, with new videos added weekly.
It’s reasonable to be wary when investing in crypto, because you’re also investing in everything associated with it, including volatility and not knowing where to begin. But if you keep your eyes on your long-term investment goals and educate yourself, you’re likely to overcome your internal obstacles.