Millions of Americans Own Crypto. Should You?

Don’t buy crypto until you’ve read this.

Key points

• A Pew Research poll found 16% of Americans have invested money in cryptocurrency.
• Young people are more likely than older people to make crypto investments.
• There are a few things to consider before deciding whether to add crypto to your portfolio.

Cryptocurrencies have become a popular investment in recent years, with millions of Americans purchasing virtual coins as an investment.

In fact, according to Pew Research Center, 16% of Americans indicated they’ve personally invested money in cryptocurrency. This includes 31% of Americans ages 18 to 29; 21% of people between the ages of 30 and 49; 8% of people between the ages of 50 and 64; and 3% of people aged 65 and older.

With so many people buying Bitcoin, Ethereum, or other virtual currencies, you may wonder whether you should do the same. In order to decide, there are a few key questions to ask yourself.

How would cryptocurrency fit into your portfolio?

Cryptocurrency is a risky investment. While it can be a part of a diversified portfolio, you’ll want to make sure you have some safer and more time-tested investments first. If you are just starting to invest and you don’t have much money to put on the line, then you likely should choose stocks, mutual funds, or ETFs as your starting investment and add cryptocurrency to your portfolio later, once you have a solid base of more stable investments.

Are you comfortable with the risk that cryptocurrency presents?

As mentioned above, cryptocurrencies tend to be higher-risk investments. Many coins are very volatile and are subject to big swings in price, often for reasons that cannot be predicted or understood. The price of virtual currencies can also become divorced from their underlying value because of social media hype or other factors.

If you cannot afford to lose the money that you are investing in cryptocurrency, you likely shouldn’t buy any of this type of investment. Instead, you’ll want to look for more stable assets with a more predictable track record of performing well over the long term.

Do you understand how to evaluate cryptocurrency investments?

You should never invest in anything you do not understand, and that is especially true when it comes to cryptocurrencies.

There’s a lot of technical details that go into determining whether a particular currency is likely to see its value increase and whether it is differentiated enough from many of the other coins out there so that it will be a sustainable investment over the long term.

Unfortunately, many people invest in coins without understanding the technologies behind them, without learning about the fundamentals of the coins they are buying, or without really understanding how or why a particular currency is going to make them money.

You don’t want to put your hard-earned cash on the line buying a volatile investment without the knowledge to pick the right currencies to buy, so if you aren’t confident in your ability to pick a coin you’d be happy to hold over the long term, then you should likely steer clear.

Remember, just because millions of other people are investing in something doesn’t make it a good investment or an optimal choice given your investing goals and timeline. You need to do what’s right for you over the long term, rather than just jumping on the bandwagon with the hopes of making a quick buck.