Cryptocurrency are highly volatile and there really is no crystal ball to tell you what will happen in the future. However, there are simple steps that you can take to lessen the chances for financial harm during a cryptocurrency slump. In this blog post, we discuss about consolidating debt and how it can help protect your funds from cryptocurrency depreciation risk.
1. Percentage of your funds to invest in cryptocurrency?
This is a tough question. In general, there are two types of investors in the cryptocurrency space: those who invest with their retirement funds and those who invest with spare cash. If you use your retirement funds to invest in cryptocurrency, you need to be careful since this money is for your golden years. The idea of getting rich quick will end up biting you later in life when you no longer have an income stream.
2. How much to risk?
Ideally, you want a 1:1 ratio of cryptocurrency to fiat. This would mean that the gold bull is priced against 1,000 ounces of gold. However, we’re not there yet. When it comes to investing in cryptocurrency, we still have a long way to go before financial stability is achieved. You need to decide how much risk you are willing to take on and keep aside money as a rainy day fund in case there are any major setbacks in the cryptocurrency market. Taking out 2/3 of the amount invested is not bad because this amount can be used for short-term investments like real estate or stocks.
3. What are your investment goals?
If you’re looking to have a long-term investment, then perhaps you should consider investing in classic stocks instead of cryptocurrencies. This is because stocks are more established and they are easier to liquidate when compared to cryptocurrency. Cryptocurrency has fewer hoops to jump through and less documentation involved, which means that you can use any funds immediately for any purpose. But in the end, it all depends on your risk tolerance. If you find yourself asking the question: “How much debt should I consolidate?”, then consider taking on less risk by investing only a small portion of your liquid assets in cryptocurrency.