Investing in cryptocurrencies has been profitable for many people. That, combined with all the success stories and evident cryptocurrency appreciation –bitcoin in particular- has created a frenzied rush among individuals who want to cash in on the opportunity.
Naturally, this crave for a taste of those profits has resulted in many people resorting to various ways to raise capital for cryptocurrency investments.
Unfortunately, some of these capital sourcing tactics can further plunge potential investors into more debt, discomfort and financial doom. Investing in the cryptocurrency market should be done tactfully and smartly.
Sure, you can risk everything you’ve got in a win all or nothing move, but doing that exposes you to undue risk and puts you at a distinct advantage when the market prices plummet.
How Not To Raise Cash for Cryptocurrency Investments
This is why we have written this article, to help you avoid the same mistakes that others have made and help you make better choices when looking to invest in this awesome opportunity.
1. Getting Personal Loans
Personal loans are meant for emergencies and urgent situations or needs. And they often need to paid off within a few weeks of getting the loan.
Taking out a personal loan in order to invest in the cryptocurrency market is not only unwise, it is a surefire way to further dig yourself into the debt hole. Smart investors know this, so they generally avoid borrowing money from anywhere for the sake of cryptocurrency speculation.
Financial experts have particularly advised against this as it can result in artificially inflated prices that can cause significant loss when they crash. Like it or not, bubbles are real in this market.
There are whale investors whose sole purpose is to pump and dump coins in a bid to make a mint. Cryptocurrency investment is high risk. So, taking out personal loans for that purpose can be a bad financial decision.
The only period you should take out a personal loan for investments is when it is a low risk investment with guaranteed returns. Anything else is just gambling. And you wouldn’t want to take out a personal loan to gamble, would you?
Cryptocurrency investments do not guarantee any returns or paybacks. If you lose your money, that money is gone forever. Let that sink in for a moment…. The alternative is use money you don’t need for cryptos. Avoid borrowing funds to invest in cryptos.
In fact, there’s currently so much borrowed funds in cryptos which could be the reason the market isn’t doing so well right now. Most investors are just waiting to break even so they can pull out their funds and walk away. So, be smart about your financial investments.
2. Diverting Student Loans
The bulk of cryptocurrency investors are youths, millennials and young adults who want to become overnight millionaires from crypto investing.
Many of these folks are still in college and have student loans, some of which they have diverted into crypto investing. This is an incredibly bad idea.
Never, ever use student loans for cryptocurrency or any sort of investment.
With over 20 percent of students in college admitting to diverting their student loans to invest in cryptos, you need to be smarter.
In an era where more and more folks are struggling to pay off their student debts, taking out of your student loans to invest isn’t exactly a smart financial decision.
A 2017 report released by The Brooking Institution has revealed that almost 6 million of the 40 million Americans with student debts, are indebted to the tune of $50,000+.
Worse still, it’s taking longer for the debtors to pay off those loans. Many working class Americans have considerable unpaid student debt.
It’s just too much risk using your student loans for high risk investments like cryptos. If you don’t make any profits, you will end up paying off those debts for the rest of your life.
3. Tampering With Your Retirement Savings
Your retirement savings are exactly that: savings that you will fall back on after decades of working in your old age.
Your Roth IRA, 401k and other investments should never be tampered with in the hopes of making a small fortune from cryptos. Financial discipline has become increasingly important, particularly in the wake of retirement accounts like the digital IRA.
These are add-on retirement accounts that are solely designated for investing in cryptocurrencies. So, if you approve, your retirement portfolio manager can allocate some of your retirement savings to trading and investing in bitcoin or ethereum.
These accounts typically have good tax benefits which serves as an incentive, but that’s not enough. Your nest egg shouldn’t be tampered with, particularly not for high risk and volatile assets like cryptos.
Your retirement savings are best invested in established, low risk financial instruments like bonds, stocks, treasury bills, proven tech or blue chip companies and so on.
4. Selling Off Current Assets
Smart financial advisors will always recommend that 5-10 percent of your portfolio include stables an established investment vehicles such as gold and silver. Those who are smart often go as high 20-30 percent.
This is not surprising seeing as these two assets tend to be stable even in the face of volatile and turbulent economies. Interestingly, they have always maintained a positive growth rate. So, while there may be a dip in price and value here and there, the overall result is a net gain and asset appreciation.
However, because these financial vehicles have remained stagnant, with little or no value increase, some investors are looking to sell them off and use that money for crypto investment.
You may want to avoid this if you’re serious about having an impressive investment portfolio. Gold and silver will almost always appreciate regardless of the state of the market.
In fact, gold has been used over the last 5,000 years as an instrument of value. That’s the oldest investment vehicle known to man.
5. Taking on More Debt than is Necessary
Most people take out a second mortgage when they have a new home or are looking to upgrade their homes. That’s the practical and sensible use of a second mortgage.
But, do you know that there are people who are taking out a second and even third mortgage just so they can invest those monies in cryptos?
Well, that’s the reality. And it does seem that more and more people are willing to try this at the risk of being in debt for the rest of their lives.
Please avoid making such mistakes with your mortgage. Be smart about your investments, otherwise, you’ll end up having your kids assume your debts long after you’re gone.
Our Final Thoughts On Raising Capital For Crypto
When it comes to investments as a whole, always remember that financial responsibility and prudence trumps unnecessary and arbitrary risk taking. Keep in mind that the market will often nosedive, before it picks up again –this is called price correction.
Your ability to hold through those periods of fear, uncertainty and doubt, is often tied to your financially prudence and smart risk taking. Don’t lose your short, home and car(s) because of a potential quick profit.
Sure, the cryptocurrency market can make you a lot of money, but that happens far less frequently than is portrayed in the media or hearsay.