Do you want to start investing in cryptocurrencies? First, ask yourself these three questions.

The New York Stock Exchange debuted a ProShares return fund BITO, +1.86 percent connected to bitcoin futures on Oct. 19. Artists are making lots of money by peddling “tokenized” digital masterpieces. Digital currencies, like insurers, are airing commercials during showtime.

Individual investors exploring crypto, on the other hand, are likely to discover a universe that differs from that of traditional finance. Pricing may change quickly through fast trading in products supported solely by blocks in computer code.

Despite the difficulty, industry observers say that investing in cryptocurrencies isn’t that unusual from other high-risk investments: Don’t invest money you can’t afford to lose, please be sure you’ve considered all of your above money bases, and take your time.

“The vast majority of the information is focused on bitcoin trading. It’s all about securing a piece of the next big cryptocurrency. It’s all about figuring out where the next moon coin will appear “Steve Larsen, a Washington state-licensed financial planner, agrees. “Investing in cryptocurrency is a once-in-a-lifetime opportunity. It’s about putting money into something that has certain fundamentals and that you feel will keep its value over time.”

Larsen, who educates financial advisers on how to talk to their clients about digital assets, believes the underlying technology, known as the blockchain, has promise. Without the need for a central authority such as banks or government authorities, computers collaborate to authenticate transactions in a blockchain network (and their associated expenses).

1.Have you had the funds to invest in cryptocurrencies?
If you decide to invest in cryptocurrency, it should be part of a group of somewhat hazardous assets that make up a modest percentage of your entire portfolio — 5 percent to 10% is a usual recommendation.

Larsen says he doesn’t advise people to invest in Bitcoin before achieving other short- and long-term financial goals. Investors should, for example, pay off any consumer debt and make sure they’re
investing enough to qualify for their companies’ matching contributions to retirement accounts like 401(k)s, according to him.

Apart from that, investing in cryptocurrency does not require a big sum of money. Several online marketplaces allow customers to buy in dollar amounts or less.

One method to get into cyber, according to Judea Greenspan, CEO of the market researcher Quantum Economics, is to set away a few pounds each week.

2. Have you completed all of your homework assignments?
Cryptocurrency exchanges have made buying, holding, and selling easier in recent years. If you don’t want to trust the exchange’s operators with your money, you’ll need to understand more about how a bitcoin wallet works and which one is best for you.

It’s also helpful to understand what blockchain technology is, how competitors utilize it, and which products have the most chance of success. Furthermore, because cryptocurrencies are surrounded by a lot of hype, investors should be on the alert for warning signs.

“This industry is filled with currencies that have no use case and in many cases are truly open frauds, meaning they’re just folks out to steal your money,” says Greenspan, who is based in Tel Aviv, Israel. He argues that identifying true innovators is the key.

While no prior knowledge of coding is necessary, it is worthwhile to learn how to utilize a cryptocurrency. Studying the white paper, which is generally a technical document that sets out how a network will function, is one way to achieve this.

For example, using a Bitcoin Wallet, Bitcoin BTCUSD, +2.41% is supposed to be actual digital money that can be used to buy and sell goods and services.

Ether ETHUSD, +2.26 percent, the second-most valuable cryptocurrency, may also be used as payment or to reimburse users who help maintain the Ethereum network. The network is built to execute “smart contracts,” which are contracts that may be handled automatically if certain conditions are met.

Greenspan recommends examining how a cryptocurrency’s supply is distributed and whether there is a limit quantity that may be circulated.

Such inquiries, he says, “may be time-consuming, but they’ll undoubtedly provide insight on what’s going to happen with the currency price over time.”

3. What are your plans to extend your horizons?
All cryptocurrencies face the same danger: blockchain technology is still in its infancy, and no one knows for sure if it will deliver the economic benefits that its proponents anticipate.

Sean Stein Smith, an assistant professor of business and economics at Lehman College in New York City, believes that “any investment… in any crypto asset out there is a gamble on the future.”

There will be cryptocurrencies that fail, even if blockchain meets the expectations of people who invest in the technology. Greenspan recommends investing in a variety of assets that he feels have long-term potential.

There aren’t many cryptocurrency alternatives to mutual funds or other investment vehicles that provide average investors with wide exposure to a variety of assets.

Some exchange-traded funds focus on firms working on blockchain-related projects, in addition to the new bitcoin-linked ETF BITO, +1.86 percent. Other ETFs have been suggested that would hold cryptocurrency, but they have not yet been authorized. Stocks in the cryptocurrency business, such as Coinbase, may potentially be considered by investors.

Investment diversification should be addressed throughout your whole portfolio, regardless of how you handle cryptocurrencies, and alternative investments should normally make up just a tiny percentage of that.