The Ethereum co-founder has a warning for new crypto investors. Here’s what to consider before you buy

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The Ethereum co-founder worries that too many new crypto investors are learning the wrong lessons from crypto enthusiasts who claim to have struck gold.

“The danger is that you have these $3 million monkeys and it becomes another kind of game,” Vitalik Buterin said in an interview with TIME, referring to the rising value and flashy excesses associated with the Bored community. Ape Yacht Club NFT.

If you are one of those people looking to buy Bitcoin or other cryptos to get rich quick, think again. Cryptocurrency is much riskier than conventional investments due to its unpredictability and volatility. This is why investment experts say it is crucial for crypto investors to clarify their goals and expectations before buying, and to stick to the 5% rule, i.e. say don’t spend more than 5% of your portfolio on risky assets like crypto.

As one of the most influential people in crypto, Buterin has watched the network he created evolve with mixed feelings. While Ethereum was intended to revamp the web and enable all sorts of uses, from fairer voting systems to peer-to-peer borrowing and lending, the Russian-born Canadian acknowledges that his vision of Ethereum has become vulnerable to the human greed.

“Crypto itself has a lot of dystopian potential if implemented poorly,” Buterin said.

It has become a vehicle for large-scale tax evasion, fraud and scams. This has led to shameless displays of mass wealth, especially for white men who dominate the industry, which has created a public perception that owning crypto will get you rich quick. And inequalities have crept into the ecosystem, including a noticeable lack of gender and racial diversity.

But despite all this, Buterin remains optimistic. Most importantly, he told TIME that he wants Ethereum to challenge the notion of centralized governments and disrupt Silicon Valley’s hold on everyone’s digital lives.

“If we don’t exercise our voice, the only things that get built are the ones that pay off immediately,” he said. “And these are often far from what is actually best for the world.”

Here are some things to consider if you’re investing in crypto or planning to buy.

What to consider before buying a cryptocurrency

ask yourself why

If you’re considering investing in crypto, start by assessing your situation and what you want to accomplish. Figure out what the vision for crypto is: are you approaching it from a long-term or short-term perspective? With crypto, you shouldn’t be looking for quick and easy money.

You will also want to ensure that your financial basics are covered before investing in crypto, such as a well-stocked emergency fund, a conventional retirement savings strategy in place, and no high-interest debt. If you’re in a good financial position, focus on building your crypto knowledge and understanding what you’re investing in before you buy. Proponents who see the long-term value of cryptocurrency point to the underlying blockchain technology and its potential to drive innovation in conventional finance and other industries.

Consider your risk tolerance

Crypto is a very volatile speculative asset. With such a young market (compared to the stock market, at least), the value of various cryptocurrencies can go up and down and there is no guarantee that they will not completely collapse. This is why you must have a high risk tolerance to buy or invest in cryptocurrency.

And that’s all the more reason for investors to play a steady long game, instead of trying to make a quick buck, experts say. If you’re in it for the long haul, you don’t have to worry about short-term fluctuations.

Find out how you plan to invest in crypto

If you have decided to buy cryptos, do some research on where and how to buy them.

Crypto exchanges are largely unregulated, meaning investors lack some of the oversight and protections they tend to get from traditional banks and investment platforms. It is the responsibility of the investor to assess and evaluate the different levels of security and assurance offered by different crypto exchanges.

Experts generally advise sticking with a mainstream, high-volume cryptocurrency exchange, like Coinbase, eToro, or Gemini, that proactively complies with federal and state regulators.

Decide which cryptocurrencies you want to buy

There are over 10,000 different cryptocurrencies, so you’ll want to do a good amount of research and education on a coin before depositing any money.

If you are interested in cryptocurrency primarily as a long-term investment, Bitcoin and Ethereum have the longest track records of increasing in value over time. Several financial advisors say their advice to clients interested in cryptocurrency is to buy Bitcoin or Ethereum, but pass on the more volatile and lesser-known altcoins.

But if you’ve done a lot of research and are passionate about the specific innovation driven by a lesser-known altcoin, then investing in it can be as much about personal belief as it is about return on investment.

Either way, experts say you should only invest what you’re willing to lose.

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