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Jan 18

Why are you buying crypto? Do you know what you’re doing?

If you look at social media you would think that the whole world was buying cryptocurrencies, but do they know what they’re doing? Do you?

According to behavioural finance experts Oxford Risk, one in five of us still don’t know what we’re doing when we invest in cryptocurrencies, despite owning some.

It’s not surprising. Cryptocurrencies are confusing things but when everyone seems to be investing but you, it’s easy to think that you should buy some even though you’re not exactly sure what you’re getting yourself into!

Happily, you can find out easily (and cheaply) by taking my one-hour introductory online course in investing in crypto. You can sign up here.

 

Some findings from Oxford Risk

Cryptocurrency investing

According to the research by Oxford Risk, even after owning cryptocurrencies, a fifth of us still rate our knowledge of the assets and investment opportunities in the sector as ‘poor or non-existent,’.

It’s understandable because every day there are new crypto products, new rules, new scams and new discoveries in the sector. Who can keep up with t all?

invest small

However, most crypto investors are just dabbling with 81% saying they bought small amounts just to find out what happens, while three-quarters. This is exactly the right thing to do if you’re not sure of something. Crypto is highly volatile and even people who know what they’re doing say that they don’t put a huge amount of their money into it. If you’re not sure then the best thing is only to put in money you could afford to lose. Really, it’s as simple as that.

Oxford Risk found that three quarters of us have invested 5% or less of our total savings in the sector.  Four out of ten (41%) have less than 1% of their savings in cryptocurrencies. Quite right too!

This is the best way to start off investing in cryptocurrencies (or anything you’re not entirely sure of). Just put a small amount in that you could afford to lose. Don’t bet your shirt on any of it!

don’t go mad!

However, Oxford Risk found that one in ten crypto investors said they have more than 10% of their total savings in the sector with 7% staking more than 20% of their assets on cryptos.

They say that demand is being driven by emotional factors such as the fear of missing out (FOMO), with over a third of adults saying they have read a lot about huge price rises while 15% say they have been encouraged to buy by friends or family.

This is a shame. FOMO (Fear Of Missing Out) should not drive any investments, let alone crypto investing. Fear and greed are the two biggest criminals when it comes to investing: they are the emotions that are most likely to make you lose your money.

 

Should you invest in cryptocurrencies?

Well to be honest there’s no ‘should’ about it.

Everyone is different and there’s no law that says you have to invest in anything in particular.

Many financial advisors are highly sceptical about crypto and that’s understandable. It’s very volatile and, as many have pointed out, most cryptocurrencies are not backed by anything. However, those on the crypto side point to the fact that fiat currencies (pounds, dollars, euros etc) are not backed by anything either now that the gold standard has been removed.

However, if you decide you would like to dip your toes into the crypto waters, make sure you get some knowledge first. It’s the same with any sort of investing: it’s very helpful to have some knowledge about what you’re doing before you put some cold hard cash in.

This is why I run my online course on how to get into investing in Bitcoin and other cryptocurrencies. It’s an introduction to the whole thing to give you

 

How much should you invest in crypto

Only a small amount.

I would say that to start off with you shouldn’t put in more than 1% of your savings/investments into crypto investments.

Later on, as you get bolder (and, importantly, know more about what you’re doing) you could put up to 5%, but I personally wouldn’t put more than that…unless you’re happy to lose more than that.

One investor I know who is a fan of both gold and cryptocurrencies says he puts 15% of his investments into gold and 5% into crypto. That’s not a bad rule of thumb for most of us if we’re concerned about inflation.

 

how do i find out more about investing in crypto?

invest in cryptocurrency

Come to my course! Of course!

It’s just an hour, it only costs £11.99 and will give you all the tools and knowledge you need to get started on the road to crypto investing.

Sign up here and come along on February 24th 2022. If you can’t make that one don’t worry as there will be more!

Also, read up some of our articles on investing in crypto.

For example

  • Here’s an introductory article on how to invest in Bitcoin and other cryptocurrencies
  • Then this is an explainer on what Bitcoin and other cryptocurrencies are.
  • We look at the top four, trustworthy platforms to buy and sell crypto here
  • And we have an ‘investing and crypto’ forum here that you can use to ask questions of me and other readers.

There are also some useful websites around that explain cryptocurrencies and cover crypto news well. For example, CoinDesk is a trusted source of crypto news.

What you must not do is go to social media and believe anything that is written or spoken there about cryptocurrencies. Some of it will be true, of course, but if you’re a newbie to this area it’s far too easy to be scammed there. Honestly the cryptosphere is absolutely full of con-artists and if you don’t know much about it it’s far too easy to be conned out of your money. Just stick to the sources we mention in MoneyMagpie and, if you have questions, put them on our forum and you will get a sensible answer!

Right now the FCA is cracking down on advertising for investing in cryptocurrencies which is a good move in my opinion. However, as they well know, most people are not pulled in by these adverts anyway. The majority of new crypto investors do so because of what they’ve seen in social media. No surprises then that many lose their cash!

Laura Suter of investment platform AJ Bell says “The regulator’s data showed that only 2% of the people it questioned were led to buy crypto from an advert when they previously hadn’t planned to, and just 5% who were thinking about buying made the leap because of an advert. Overwhelmingly people hear about crypto through social media, with the FCA finding that 39% of people saw ads for crypto on Instagram, Facebook or other social media, compared to 13% for traditional advertising in newspapers or TV.”

You have been warned!

 

 

This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

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