Cryptocurrency Hype: Is adding crypto to my investment portfolio a good idea?

Bitcoin and other cryptocurrencies see record high post election- should I invest?

Cryptocurrencies have gained significant attention over the past decade... but especially in the last 7 days since the US election. Unless you have been on a digital detox for the last week, I am sure you have heard about Crypto in some sort of capacity and the recent gains.

Bitcoin surged to a record high along with many other coins as investors pumped money into cryptocurrencies following the election of Donald Trump. Bitcoin is up 27% in the last 7 days, with other popular coins like DOGE up 111%, Solana up 27% and Ethereum up 33%.

Before you go dumping your entire emergency savings into Crypto, it is essential to separate the hype from the reality and understand the basics.

This blog post will help you understand what cryptocurrencies are, evaluate their potential and see if adding Crypto to your investment portfolio is right for you.

I will not deny that you can potentially make a solid return, and many people have made "lifechanging" returns or scored big timing crypto...but there are several things to consider when adding to your investment portfolio.

Don't just listen to a crypto finance bro telling you to put in all your money without doing your own research.

So what is cryptocurrency anyway?

In basic terms, cryptocurrency is digital money. This kind of currency is designed to work through an online network without a central authority — meaning it’s typically not backed by any government or banking institution — and transactions get recorded with technology called a blockchain.

The most well-known cryptocurrency is Bitcoin which emerged in 2009, but since then thousands of other crypto curriencies have emerged.

It’s important to remember that Bitcoin is different from cryptocurrency in general. While Bitcoin is the first and most valuable cryptocurrency, the market is large — there are thousands of cryptocurrencies. And while some cryptocurrencies have total market valuations in the hundreds of billions of dollars, others are obscure and essentially worthless.

The Hype Around Cryptocurrencies

There is a lot of excitement around cryptocurrencies. Many people are drawn to the idea of a decentralized financial system. They believe that cryptocurrencies can provide greater financial freedom and privacy. The rapid increase in the value of some cryptocurrencies has also attracted investors looking for high returns.

Social media and news outlets often highlight the success stories of early adopters and the massive gains that some have made with timing the crypto market perfectly. These stories can create a fear of missing out (FOMO) among potential investors. However, it is crucial to approach these investments with caution and conduct thorough research before putting in money that you can't afford to lose.

Potential Benefits

Cryptocurrencies offer several potential benefits. They can provide faster and cheaper transactions compared to traditional banking systems. Cryptocurrencies can also offer financial services to people without access to traditional banking. Additionally, they can provide greater transparency and security through blockchain technology.

Reality Check: Risks and Challenges

Despite the potential benefits, there are significant risks and challenges associated with cryptocurrencies.

Regulatory uncertainty is a challenge, but also what has been the catalyst in the surge in prices in the last week. Governments around the world are still figuring out how to regulate cryptocurrencies. Changes in regulations can impact the value and legality of cryptocurrencies affecting the market in many ways. It is crucial to stay informed about regulatory developments in your region. 
 
The value of cryptocurrencies are highly, highly volatile in general. Its prices tend to change rapidly, and while that means that many investors have made money quickly by buying in at the right time, many others have lost money by doing so just before a crypto crash.

Many cryptocurrency projects are untested, blockchain technology in general has yet to gain wide adoption and it has not been around long enough to understand the long term historical trends. If the underlying idea behind cryptocurrency does not reach its potential, long-term investors may never see the returns they are hoping and speculating for.
 

Lastly, security is a major concern in the cryptocurrency space. While blockchain technology is secure, the platforms and exchanges where cryptocurrencies are traded can be vulnerable to hacks and fraud. It is essential to use reputable exchanges and take measures to protect your investments. 

It is essential to understand that investing in cryptocurrencies is speculative and not suitable for everyone.

Are cryptocurrencies financial securities, like stocks? 

Not really....

Cryptocurrencies are not generally considered financial securities, like stocks, bonds, or other traditional investment products. However, the distinction can get a bit complex, as it depends on the specific cryptocurrency and how it is used.

Most cryptocurrencies, like Bitcoin or Ethereum, are viewed more like a commodity or a currency. They don’t represent ownership in a company or an entitlement to any profits (like a stock would). Instead, they function as a medium of exchange or a store of value.

Security tokens, on the other hand, are designed to represent ownership in an asset, company, or a stake in a project, and they are more likely to be regulated as securities. These could be tied to future profits, dividends, or voting rights in a company, similar to traditional stocks.
 

Your decision: Is adding cryptocurrency to my investment portfolio a good idea?

Potentially, depending on your current financial situation and your risk tolerance.

When considering investing in cryptocurrencies, it is essential to make informed decisions and understand your personal risk tolerances. Start by educating yourself about the different types of cryptocurrencies and their underlying technology. For beginning investors, I would encourage sticking to some of the larger, more well known crypto curriencies in the market. 

Diversification is also important. Avoid putting all your money into a single cryptocurrency. Instead, consider a diversified portfolio to spread the risk. Additionally, keep track of market trends and stay updated with news and developments in the cryptocurrency space.

Here is a checklist to help determine if adding cryptocurrency to your portfolio is a smart move:

- You have paid off high interest debt
- You have an emergency savings account in available cash of at least 6 months of living expenses
-The money you are willing to invest in crypto and risk for a higher return you are also willing and can afford to lose
-Your investment portfolio is diversified with other assets such as stocks, bonds & real-estate and you are looking to add to your portfolio- in general I would encourage crypto making up no more than 10% of your investment portfolio
-You are not expecting to get rich quick or to double your money overnight.

Don't be afriad to seek professional advice or coaching- asking questions and talking to someone else can help ensure you are not getting lost in the hype.

If you are unsure about investing in cryptocurrencies, consider seeking advice from a financial professional. They can provide personalized guidance based on your financial situation and goals. A professional can help you navigate the complexities of the cryptocurrency market and make informed decisions.

In conclusion, while cryptocurrencies offer exciting possibilities, it is essential to approach them with caution. By understanding the hype and reality, you can make informed decisions and manage the risks associated with cryptocurrency investments.

Do not put all your eggs in one basket, expect a hail mary return, a get rich quick solution.