Crypto Interest Is Booming. Is It Right for You?

by Maurie Backman | Updated July 17, 2021 - First published on June 5, 2021

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More people are buying digital currencies. Should you follow their lead?

There was a time when cryptocurrency was one of those things most of us had heard of but didn't really know much about. But that's changed in recent years.

Nowadays, an estimated 14% of U.S. adults own some type of cryptocurrency, according to new research by The Ascent. That amounts to roughly 21 million people.

Not only that, but more than 50 million Americans are likely to buy cryptocurrency in the next year. That includes 22% of people who have never purchased cryptocurrency before.

At this point, you may be one of the people thinking of adding cryptocurrency to your investment portfolio. But is that a smart move for you? You can ask yourself these important questions to find out.

1. Do I understand what cryptocurrency is and how it works?

A lot of people have heard of cryptocurrency, but do you really understand what it is and how to buy and sell it? Be sure to do some reading on cryptocurrency before rushing out to own it.

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2. Have I narrowed down the right currency to buy?

When we talk about cryptocurrency, it's natural to think of well-known coins like Bitcoin and Ethereum, as those tend to get a lot of press. In reality, there are a lot of different types of cryptocurrency -- over 10,000. So don't assume that the most popular ones are the right ones for you.

3. Does buying cryptocurrency fit in with my overall investing strategy?

Even though 65% of Americans who own or have owned cryptocurrency typically sell it within a year, that doesn't mean you have to go that same route.

Your goal as an investor may be to build a solid portfolio that gains a lot of value in the long run. Or, your goal may be to take some risks today in the hopes that they'll pay off in the near term and then build a separate portfolio for long-term goals. Neither is the right or wrong approach -- that's a matter of personal preference. But either way, you should make sure that buying cryptocurrency aligns with the general strategy you've set for yourself.

4. Do I understand the risks involved?

There's no such thing as a risk-free investment. When you open a brokerage account and load up on stocks, there's a chance that some or all of the shares you buy will drop in value over time.

But just as stocks can be volatile, so too can cryptocurrency. So before you invest there, make sure you understand the risks you're taking on. One big risk you're assuming when you buy digital coins is that we don't know if cryptocurrency will become a widely accepted form of payment or not, and that will heavily dictate its eventual value. Keep that in mind as you make your decision.

Clearly, cryptocurrency interest is really taking off, but before you buy it yourself, make sure it's right for you. There is a lot of money to be made in the cryptocurrency market, but do your research beforehand and make certain you're investing in it for all of the right reasons.

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