Cryptocurrencies have come a long way in recent years, with a market capitalization of over $2 trillion, with large companies including Tesla and MicroStrategy investing in bitcoin (BTC).
While institutional investment in cryptocurrencies has grown in recent years, social media is dominated by discussions about how retail investors should approach crypto investments. While some advocate playing all-or-nothing with small-cap cryptocurrencies, more conservative approaches include simply investing in bitcoin or gaining access to indices.
The younger generation is more likely to invest in cryptocurrencies as surveys have shown that 83% of millennial millionaires now own cryptocurrencies. But what about those who are not a millionaire by average salary? Is it worth considering cryptocurrencies at all?
Cointelegraph reached out to various experts to find out how they think a person with an average US salary of $45,000 to $50,000 per year should approach cryptocurrency investment.
Pay yourself first
Common sense in personal finance dictates that before building a portfolio, investors should save up a few months of cash for living expenses to prepare for a rainy day. How you save that money depends on who is giving the advice, but the general idea is to pay yourself first.
Former US President Barack Obama at home in Missouri in 2010. “Kitchen table trouble” is an American phrase referring to taxes, investments, retirement, and other day-to-day worries. Source: Jewel Samad/AFP/Getty via The New Republic.
Bill Barhit, CEO of crypto investment app Abra, spoke to Cointelegraph expressing this sentiment and stating that retail investors “should always pay themselves first.” But for him, paying himself first means “saving cryptocurrencies for the long term, especially bitcoin and ether.”
Barhit added that he holds most of his wealth in crypto “along with some cash in high-interest accounts.” During a market crash, he says, he invests between 10% and 25% of his savings in stocks.
For Barkhedt, investments in cryptocurrencies should be part of the portfolio of a private investor, and he himself asks about the “concept of a balanced portfolio.” “Balanced portfolios are for lazy people who don’t do research, don’t understand the markets, or can’t afford short-term losses,” he added.
Instead, Barhit believes that wealthy investors “know that focusing on investments based on their own beliefs and responsibilities, and the ability to handle losses, is the key to success.”
Steven Stoneberg, CEO of cryptocurrency exchange Bittrex Global, told Cointelegraph that for retail investors with small amounts to invest or limited access to portfolio strategies, “cryptocurrencies may not make sense at scale, but that doesn’t mean they shouldn’t. invest.”
Stonberg said that investing in cryptocurrencies would be equivalent to investing in the Internet in 1993 – before the dot-com bubble – and so “the best approach is to consider investing in more established currencies like bitcoin and ether,” such as those that have solid use cases. and recognized. communities. he added:
“Cryptocurrencies should be part of a more balanced portfolio and investors should be careful when doing their own research. Diversification is a robust and trustworthy portfolio model that has proven effective in protecting against waves of shocks.”
Caleb Silver, editor-in-chief of investment and finance website Investopedia, was more conservative, saying that cryptocurrencies are “highly volatile and speculative investments and should be treated as such.”
As far as silver is concerned, cryptocurrencies should not be seen as balancing items for the wallet. Given the performance of “many of the largest cryptocurrencies,” investors may consider limited access to this asset class, but “should not rely on them to balance their portfolios.”
Thomas Perfumo, head of trading and strategy at cryptocurrency exchange Kraken, told Cointelegraph that the exchange “cannot make recommendations about what people should do with their money” but has shown enthusiasm for “the ability to be rewarded for effort.”
As for the amount to be allocated to the portfolio, most experts responded “It depends” on any actual figures, always less than 10% of the portfolio.
Cryptocurrency, funds or indices?
In early 2021, strategists at Wall Street banking giant JPMorgan suggested that allocating 1% of the portfolio to bitcoin could act as a hedge against volatility.