Getting Rich Off Cryptocurrency Isn’t As Easy as Internet Millionaires Make It Look
The rules of investing seem simple: diversify your portfolio and focus on the long term. That’s until you see some guy on Reddit get rich overnight betting on cryptocurrency.
Erik Finman became a millionaire after investing $1,000 in bitcoin when he was 12. Glauber Contessoto invested all his savings in dogecoin on Feb. 5 and by mid-April, his investment was worth more than $1 million, he told CNBC Make It. He wasn’t alone. When Dogecoin’s price surged 400% in a week last month, owners took to Twitter and Reddit to share that they had made thousands of dollars.
So you may be seriously regretting not throwing some dollars into one of these cryptocurrencies. But don’t be too hard on yourself.
Picking the right cryptocurrency — and getting rich off of it — is a lot harder than it looks. Here’s why.
There are tons of cryptocurrencies
You’ve probably heard of Bitcoin, the first cryptocurrency, whose market value of $1 trillion or more accounts for around half of all cryptocurrency investments. You may also be familiar with Ethereum and Litecoin, which have become more widespread as a result of the fact that you can buy and sell them as quickly as submitting a Venmo request for dinner.
But there are a slew of other cryptocurrencies you’ve probably never heard of — over 9,000, according to CoinMarketCap.com — and more are being created every day.
There’s no guaranteed future
Even if you choose the correct cryptocurrency, buy at the “appropriate” time, and intend on making a lot of money in the long run, there’s no guarantee that the coins will be there forever.
Even Bitcoin, which is widely regarded as the most reputable cryptocurrency, might be outlawed or heavily controlled. Treasury Secretary Janet Yellen has stated that the US government may need to “curtail” the usage of Bitcoin, claiming that it is mostly used for “illicit finance.”
How to responsibly invest in crypto
If you want to scratch your crypto itch, you may include it with your equities and bonds in your portfolio.
Bitcoin’s success does not appear to be strongly associated with stock performance, and having certain assets do well while others stink is beneficial. However, as Money has observed, the correlation increases during “difficult times,” so be wary of overexposing your portfolio to bitcoin.
According to experts, you may put up to 5% of your whole wealth into risky assets like cryptocurrencies. Just make sure you’re not expecting to become a billionaire overnight and that you’re investing money you’re willing to lose.