5 questions to consider before you buy crypto in 2023

Crypto is the future. They have been transformative in trading and facilitating payment. However, they have not been performing well in recent months. For instance, bitcoin (BTC) fell more than 50% in 2022 before recovering.

Therefore, as the first thing, consider crypto volatility before buying.

Critics remain skeptical, saying the crypto market is going through winter and won’t recover. But recent trends show improvements.

If you decide on cryptocurrency, the following are important questions you should ask yourself before investing.

Questions to ask before you consider the investment in crypto?

If active in cryptocurrencies, use the bit index app to facilitate your crypto trading. There are specific questions to be asked when you consider cryptocurrency investment. We discuss them in the below sections:

Question 1: Do you want to invest for the long term?

When investing in cryptocurrency, you must clearly envision the timeframe. Do you want to invest in it for the long term? Cryptocurrencies are highly volatile. Prices can rally to reach new highs only to drop, even losing more than 80%. It is so volatile, and that’s the sad reality of cryptocurrency. Therefore, to invest in crypto, consider looking at longer time frames. 

Question 2: are you investing in a diversified portfolio?

If you are investing in a cryptocurrency, you must know whether you want to get exposure only to the most successful coins. Even so, be it the best cryptocurrency with the highest market capitalization, your investments are never safe. 

To counter this, consider investing in a diverse portfolio. This is because cryptocurrencies are volatile, and should the market crash, users who are not diversified might lose all their investments. In a diversified portfolio, your potential for high returns might be low. However, they do not put all your investment at risk.  

Question 3: how do you set investment goals?

When you are investing in cryptocurrency, have you thought of the goal? Do you have the plan to attain these goals? This is a major mistake that most investors make with cryptocurrency investment. 

They tend to invest in cryptocurrency randomly, with little help. It should be remembered that cryptocurrency investment is different from other asset classes.

When investing in crypto, your goals should be measurable, attainable, and practical, helping making your investment profitable in the long run. 

Question 4: Are you selecting a safe cryptocurrency exchange?

You might have heard that cryptocurrencies are traded in exchanges. But you need to be quite vigilant with these exchanges. 

You will get to know about different cryptocurrency exchanges. But please remember that not all of them are safe for your investments. It would help if you had a thorough understanding of cryptocurrency exchanges. 

This is a vital thing that you ought to consider. Research the exchanges and see if they are transparent or not. Only then should you go for the investment. Otherwise, you should refrain.

Question 5: have you considered the risks involved with cryptocurrency investments?

Investing in cryptocurrencies can be fraught with risks and uncertainties. As mentioned, cryptocurrencies are highly volatile, and their prices can increase and decrease rapidly. For instance, in 2022, BTC prices dropped by more than 50%.

As witnessed recently, the sharp fall of crypto assets can also accelerate the collapse of some crypto exchanges. 

Putting an end to the discussion 

Cryptocurrency is the future of transactions, and they have its advantages. Therefore, notwithstanding the fall in value, there are investors considering investing in crypto. Nonetheless, before diving in, consider asking yourself the above questions.