News
8 Things to Consider Before Investing in Crypto in 2024, According to Financial Experts
reception-bg / Getty Images
Cryptocurrency has had a pretty crazy ride since its launch in 2009. Today, it’s a real revolution. controversial subject among investment experts. This is largely because it is volatile and poorly regulated.
Find: 5 Ways to Earn at Least 5% APY on Your Money (Without Using the Exchange)
Read: 3 Things You Need to Do When Your Savings Hit $50,000
Although controversial and still subject to heated debate, the crypto market remains a formidable and popular investment sector. For example, at the end of 2021, nearly 300 million people worldwide were estimated to own some type of cryptocurrency, according to crypto.com, as reported by Forbes.
You may be wondering what the year might hold for this growing but controversial space. Let’s hear what financial experts think – and what you need to consider before investing or making investments in crypto in 2024.
Legitimacy and security of the project
Not all cryptocurrencies are the same, and some crypto projects are sketchier than others. This is why it is imperative to do your homework on every crypto project you plan to embark on. Make sure it is legitimate and secure.
“Look for a clear roadmap, a competent team and a transparent business model,” said Dmitry Mishunin, CEO of HashEx.
You should also ensure that the project has undergone a thorough security audit by a reputable company.
“This is crucial for smart contract-based projects to prevent vulnerabilities and hacks,” Mishunin said.
Experts: Make These 7 Financial Resolutions If You Want to Get Rich on an Average Salary
Evaluation challenges
Part of what makes crypto difficult to understand – for newcomers in particular – is that it doesn’t fit traditional valuation models.
“Prices are driven less by fundamentals and more by narratives, such as Bitcoin being perceived as digital gold,” said Daniel Krupka, head of research at Currency Office.
Be wary of narratives that lean heavily in favor of crypto. Instead, focus on what your search yields.
Quality of information
Another thing to consider when approaching crypto is that it is difficult to obtain quality information. According to Krupka, this is due to bias and technical complexities.
“Successful investing often depends on thorough, independent research and understanding of the narratives that drive crypto projects,” Krupka said.
Bull markets and bear markets
You also need to know how bull markets work in crypto and how bear markets work – they don’t necessarily look like the traditional stock market.
The story continues
“Crypto bull markets often experience gradual rallies with sharp corrections, while bear markets typically experience gradual declines with sharp rallies,” Krupka said. “This behavior has a significant impact on investment strategies.”
Potential Developments Around Bitcoin ETFs
When considering investing in cryptocurrencies in 2024, it is essential to stay informed about potential developments around Bitcoin ETFs.
“The U.S. Securities and Exchange Commission (SEC) is expected to make decisions on several one-time Bitcoin ETF applications by January 2024,” said Liam Hunt, director and analyst at Informed investor. “This decision is highly anticipated as it could significantly influence future regulations and investment trends in the cryptocurrency space.”
But what exactly is a Bitcoin ETF?
“A Bitcoin ETF offers investors a way to invest in Bitcoin without the complexities of direct ownership, such as managing crypto portfolios or navigating crypto exchanges,” Hunt said. “They are designed to track the performance of Bitcoin, providing a simpler and regulated approach to investing in this cryptocurrency.”
Perhaps the good news for those considering investing in crypto is that the potential approval of Bitcoin ETFs could expand the investor base for Bitcoin, “possibly leading to increased adoption and price stability,” Hunt said.
Even with a Bitcoin ETF, there is risk
While a Bitcoin ETF could make the crypto world a little cleaner and clearer, such a development would not eliminate the inherent risk that cryptocurrency carries.
“Investing in Bitcoin ETFs also carries risks such as counterparty risk, liquidity risk and market volatility,” Hunt said. “The crypto market is known for its high volatility, and the price of Bitcoin can significantly increase or decrease in a short period of time. Additionally, the regulatory landscape for cryptocurrencies in the United States continues to evolve, meaning some regulatory risk remains even if Bitcoin ETFs are approved.
Crypto Could Become More Accessible (If There Is a Bitcoin ETF)
Another thing to consider is that, if approved, a Bitcoin ETF would make the cryptocurrency more accessible to more people, which could increase adoption of Bitcoin in general.
“This anticipated ruling from the SEC will be crucial for the cryptocurrency market, as it could pave the way for increased mainstream acceptance and adoption growth for Bitcoin,” Hunt said.
Community and support
Another thing to consider when approaching crypto is what the community and support for the project is like.
“A strong, active community and responsive support are indicators of the health and potential longevity of a project,” Mishunin said.
More from GOBankingRates
This article was originally published on GOBankingRates.com: 8 Things to Consider Before Investing in Crypto in 2024, According to Financial Experts