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Should I Invest in Crypto? What You Need to Know to Decide

Cryptocurrencies have proven to be one of the best investments in history. At the same time, they’re a completely new kind of asset that most people don’t really understand.

If you’re planning to invest in crypto or if you already have, keep reading for a few key points to think about. Since we know many people think of cryptocurrencies as a dangerous investment, we’ll start by addressing these concerns. But be sure to continue past these to understand the benefits that, in our opinion, outweigh the risks by a large margin.

Cryptocurrencies Are More Volatile than Traditional Investments

The value of Bitcoin and other cryptocurrencies can fluctuate wildly. It’s common for them to rise or fall by 10% or more in a single day. But when you step back from the day-to-day view and consider crypto as a long-term investment, you’ll have a better sense of its potential.

Look back at the historical value of Bitcoin, Etherum, or any other coin that’s grabbed your interest. Then compare it to the historical value of any other investment you’re considering.

Granted, crypto is unique in a number of ways and it’s too new to know where it will be in the future. But the most popular cryptocurrencies have appreciated much faster and more reliably (in the long term) than virtually any other assets.

How to Keep Your Cryptocurrency Safe

It’s important to know that cryptocurrencies are not insured by the FDIC the way that checking and savings accounts are. That said, the FDIC does not insure stocks, bonds, mutual funds, or the majority of other investments either. So in that sense, investing in the S&P 500 is no safer or more dangerous than buying crypto.

It’s also important to understand that crypto accounts can be hacked. To protect your crypto investments be sure to use all of the available security options provided by your crypto exchange and digital wallet.

Two-factor authentication is the most common of these protections. Even with 2FA enables, be sure to use a unique, complex password for any of your crypto accounts. And of course, never share your private keys with anyone.

Investing in Cryptocurrency as a Hedge against Inflation

The U.S. minted trillions of dollars out of thin air during the pandemic. With such a dramatic increase in the supply of a currency, economic theory suggests that its value will like fall. This is the basic principle of inflation; as supply increases, demand (and therefore value) decreases. And the risk of inflation is the only thing stopping the U.S. and other countries from minting more cash whenever they want.

Bitcoin and many other cryptocurrencies, on the other hand, have a limited supply. Yes, new Bitcoins are created regularly. But there is a defined process for doing so that can never change. Plus, there is a cap to the number of coins that most cryptocurrencies will ever produce.

As an example, there will never be more than 21 million Bitcoins. And when there is a limited supply of an asset, inflation doesn’t pose a problem. In fact, economic theory suggests that demand for limited assets (and therefore value) should continue to rise.

Diversify Your Investments

Diversification is a cornerstone of any prudent investment portfolio. If you put all of your funds into a single investment, you risk losing everything if something happens to the asset. This applies to any investments, from stocks and bonds to cryptocurrencies or real estate.

The price of Bitcoin and other cryptocurrencies occasionally correlates with other assets, including precious metals like gold. But it often fluctuates independently of any other stores of value. So by investing in Bitcoin or other cryptocurrencies, you can protect your investment from swings in other markets. And by also investing in other assets, you can protect yourself from swings in crypto.

How Much Should You Invest? Dollar-Cost Averaging Your Crypto

Only you can determine what size investment you’ll feel comfortable making. But once you’ve settled on a figure, it’s a good idea to invest using the Dollar-Cost Average (DCA) method. To do so, use a predetermined percentage of the funds you plan to commit to crypto to buy your coin(s) of choice at regular intervals.

If you plan on investing $1,000 total into crypto, perhaps you’d buy $20 worth of crypto weekly or $100 every month. Rather than committing your entire investment right away, the DCA approach offers some protection from crypto volatility.

Although the most popular cryptocurrencies have proven to be excellent investments, that’s not true of all coins. Many altcoins have plummeted in value since their initial coin offering (ICO). And it’s always possible that the same could happen to any investment, be that Bitcoin or stock in a huge company like Amazon.

That’s why it’s important to only invest what you can afford to lose. No matter how sure you are of an investment, it’s never worth the risk to put all of your personal finances on the line. So even if you have a hot tip about the next big thing in crypto, play it safe.

No one can reliably predict financial markets to buy or sell at the perfect moment. And all too often, those who try doing so wind up losing money or missing out on potential gains. The DCA method lets you spread your risk out over time. And as a result, you’ll never have to worry about investing at the wrong moment.

What Cryptocurrencies Should You Invest In?

Bitcoin continues to be the most valuable cryptocurrency. But there are countless others, such as Ethereum, that have a variety of uses beyond serving as just a form of currency. Others, like Dogecoin, have little to no practical value but have skyrocketed in value all the same. Read up on the benefits and drawbacks of any cryptocurrencies that you’re interested in and decide for yourself.

How to Learn about Various Cryptocurrencies

For most people, it’s much easier to learn about a topic when it relates directly to their own interests. With that in mind, consider making a small initial investment in Bitcoin, Ethereum, or any other coin you like.

With some skin in the game, you’ll be motivated to follow the fluctuations of your asset. And when the price spikes or falls, you’ll naturally be drawn to seek out market data for explanations. News outlets are covering crypto more and more and there are countless internet resources, including the RockItCoin blog, that provide even more analysis.

How to Invest in Bitcoin and Other Cryptocurrencies

RockItCoin makes it easy to buy cryptocurrencies in a number of different ways.

You can buy Bitcoin, Bitcoin Cash, Ethereum, and Litecoin using cash at 900+ Bitcoin ATMs we’ve installed throughout the United States. You can buy Bitcoin online by visiting our website which also lets you buy a variety of other cryptocurrencies. And you can also buy crypto from your smartphone using the RockItCoinX app.

For transactions of $10,000 or more, try our Bitcoin OTC trading services. Doing so will provide you with lower rates and one-to-one help from one of our experienced crypto managers. And these services aren’t limited to just Bitcoin. Our OTC trading desk can facilitate large trades for a wide variety of coins.

Our mission is to make cryptocurrencies easily accessible to all. So if you’d like to see us offer any additional ways to invest in crypto, let us know!