How Much Should I Spend on Crypto?

For many investors, cryptocurrency is a new venture filled with promise. Some currencies skyrocketed in value over the last few years, turning humble tech enthusiasts into millionaires virtually overnight!

Seeing those success stories may have you eager to put money down. But how much should you spend on crypto?

Generally, financial experts recommend a more conservative approach when investing in crypto for the first time. Many recommend limiting crypto to just five percent of a larger portfolio. Of course, what you choose to do is up to you. Here are a few things to consider when planning your investment strategy.

Risk Tolerance

One of the most important things to consider is your overall risk tolerance. How much can you afford to lose to experience big gains?

Crypto works very differently than other investment types. It's highly volatile, experiencing dramatic highs and lows. At its peak, some virtual currencies were worth thousands. Take Bitcoin as an example. It exceeded $65,000 during the last quarter of 2021.

However, that value was short-lived. Many crypto prices are 90 percent less than their all-time high! Who knows when or if it will reach those peaks again?

Crypto is inherently volatile, and you must assess your risk tolerance before developing a strategy. Financial experts recommend limiting crypto to five percent of your portfolio to offset those risks. You can experiment but won't lose everything if things go south.

Long-Term Investment Goals

Another factor to think about is how you want your investments to perform in the long term. There's plenty of liquidity in the market, but whether crypto prices will rise again is unknown.

Realizing short-term gains may not be possible. However, investors may see returns if they're willing to sit on investments for months or years.

Prioritize High-Quality Projects

Like traditional stock, virtual currencies have varying levels of potential. Tried and true coins like Ethereum and Bitcoin will likely remain valuable for years. Many upcoming projects are also gaining traction.

Avoid low-quality coins that serve niche markets. To maximize your return, you must focus on coins with upside potential.

Read a similar article about Bitcoin price chart here at this page.