Don’t get swept up by the investment hype of cryptocurrencies

Learn to invest
Virtual assets/Crypto assets

Author: Mr Chin20/09/2021

Apart from biotech and technology stocks, cryptocurrency has also become a big emerging investment trend.

Cryptocurrency has been a hot topic in the investment market. Since day one, it has drawn much attention from the public, including financial experts and key opinion leaders (KOLs). Possibly due to the celebrity effect or market hype, more and more investors, are trading cryptocurrencies both locally and overseas.

It is not surprising to see investors being drawn towards trendy investments that are widely-covered in the news and online communities, such as cryptocurrencies. However, when dealing with new and less familiar financial products and investment themes, it is important to fully understand their features and risks, and carefully evaluate if they are suitable to you. Speculative investments tend to carry very high risks so be careful not to just hop on the investment band wagon due to the hype.

Price can rise or fall

Similar to other hyped investments in the market, cryptocurrencies are speculative and their prices can fluctuate greatly within a short period of time. Take the world’s first cryptocurrency, Bitcoins, for instance, which price has been very volatile. Earlier in the year, after hitting its record high of USD60,000, its price quickly plunged to UD30,000, sending shockwaves to investors. As cryptocurrencies are sensitive to market news and rumours, a single post on the internet or social media may lead to significant price movements.

While there are different views on the value and prospect of cryptocurrencies, speculative investors tend to be overly optimistic, believing that the prices of cryptocurrencies will go up even further in the long term. Investors should not turn a blind eye to the downside risks or volatilities, as the consequences can be serious.

Be an informed investor

There are many types of cryptocurrencies in the market, with each carrying different features and risks. Before making an investment decision, it is important to understand the product thoroughly. If you are just following the herd to invest but without considering the unique features and risks of your cryptocurrency, you could be bearing a huge risk.

Last but not least, there are more and more investment scams involving cryptocurrencies and of different tactics, such as developing fraudulent investing apps, or deceiving investors to participate in fraudulent initial coins offerings schemes. Investors interested in cryptocurrencies should stay vigilant to these scams.