4 Signs Investing in Crypto Isn't for You

You don't want to make a big investing mistake.

A record number of Americans are planning on investing in cryptocurrencies. But while there's definitely potential to make money by buying crypto, putting money into this asset class isn't the right choice for everyone.

In fact, there are four big signs that investing in crypto may not be the best choice for you.

1. You don't yet have a portfolio of more traditional investments

Some investments are riskier than others. Cryptocurrencies can be one of the riskiest due to the volatility associated with virtual coins and the speculative nature of crypto pricing. As a result, it's generally best to build a portfolio of safer, more traditional investments such as stocks and bonds before buying crypto.

If you have a diversified portfolio of investments that have a proven track record of success, you'll stand a better chance of earning reasonable returns and building wealth over time -- even if your crypto investments don't pan out. In fact, financial experts such as Suze Orman recommend investing money in crypto only if you can afford to lose it.

2. You're a risk averse investor

If you aren't comfortable taking risk and you're likely to sell at the first sign your cryptos are seeing a price decline, then you shouldn't be investing in cryptocurrency at all.

If you're scared of taking on risk, you're likely to sell in a panic at the most inopportune times. This will all-but-guarantee you'll end up losing money you potentially could have recovered if you'd waited out a temporary price decline. Risk averse investors are better off avoiding volatile assets for exactly this reason.

3. You're hoping to make a quick buck

If your goal is to buy cryptocurrencies that are trending upwards and sell quickly, then the chances you're going to lose money are quite high.

Short-term trading is almost always a recipe for disaster since it's really hard to time your purchases -- and since you often won't find out a particular asset is trending upward until it's price is already at or near its peak. People who invest for the long-term tend to have much more success with investing because they don't have to time things perfectly.

So unless you are confident the cryptocurrency you are buying is a coin you'd be comfortable holding for many years -- through good economic times and bad -- you should probably avoid investing in it.

4. You're planning on picking crypto investments based on celebrity endorsements or social media influencers

Finally, many people invest in cryptocurrency for the wrong reasons. If you're hoping to buy a coin because a particular celebrity likes it or because you read about it on social media, chances are you'd end up being on the wrong side of things.

You can't always trust the advice you read from influencers or on social networks for several reasons. Some people may have a financial incentive to promote a particular coin, or they're hoping to make money on their own investment by convincing others to follow a trend. And even those who have good motives may have different investing goals than you.

Unless you know how to research coins carefully to assess their long-term potential -- and their risks -- then you shouldn't be investing in cryptocurrency.

If you spot any of these four signs, you should consider either picking a different investment or taking the time to become more informed about the cryptocurrency market before investing in it.