The crypto market may be in a slump right now, but it still has plenty of potential. If it's headed for a rebound, investing now could prove to be lucrative.
Cryptocurrency, in general, is one of the fastest-growing assets in history. Between 2020 and 2022 alone, Bitcoin (BTC +1.02%) earned returns of nearly 600%. Ethereum (ETH +1.78%) was up more than 2,200% in that time frame, and Solana surged by a staggering 17,760%.
But crypto is also notorious for its extreme volatility, so can you realistically depend on it to help you retire early? Here's what you need to know.
Is crypto still a safe investment?
Cryptocurrency has always been high risk simply because it's still speculative. Nobody knows where it will be a decade or two from now, or whether the sector will survive at all. Investors are still divided over its future, and that uncertainty has led to some wild price fluctuations.
CRYPTO: ETH
Key Data Points
In the short term, then, don't expect to see any significant returns. While the market could rebound in the relatively near future, crypto has proven that it can sink as quickly as it can surge.
That said, crypto's long-term potential is far more promising. For example, while Ethereum is currently down nearly 70% from its all-time high, it's still up by close to 52,000% since it was launched in 2015.
Ethereum Price data by YCharts
In other words, if you had invested $1,000 in Ethereum in 2015, you'd have more than $519,000 today -- and that's despite the crypto market meltdown over the past year.
Of course, there are no guarantees that you'll see these types of returns again, even if the market does bounce back. But if investors have learned anything from crypto over the past few years, it's to expect the unexpected.
Can crypto help you retire richer?
Crypto can potentially help you earn enough to retire early. However, it's crucial to have the right outlook and strategy.
Again, this is a risky investment, and there are no guarantees it will even exist in a few decades, let alone deliver life-changing returns. If you're going to include crypto in your portfolio, it's important to ensure you're limiting as much risk as possible -- and there are a few ways to do that:
- Only invest what you're willing to lose: Crypto is still in its early stages, so there's always a chance you could lose whatever money you invest if it fails. Before you buy anything, consider how much you can realistically afford to risk.
- Double-check your diversification: A well-diversified portfolio can help protect your savings if crypto doesn't pan out. While everyone's investments will look different, it's wise to invest in at least 20 to 25 stocks from a variety of industries. In other words, make sure you're not putting all your eggs in one basket with crypto.
- Invest in the right places: Although all cryptocurrencies are speculative to a degree, the ones with the most real-world potential are the most likely to succeed. Right now, the two safest bets are Bitcoin and Ethereum, as they're the largest and most widely used.
Cryptocurrency can potentially be lucrative, and if the market takes off again, you could stand to make a lot of money by investing now when prices are lower.
While there are still no guarantees that crypto will help you retire early, the right strategy can limit your risk as much as possible. By keeping realistic expectations and investing in the right places, you'll improve your chances of potentially making a lot of money over time.
