5 Questions To Consider Before You Buy Crypto In 2023

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Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Last Updated December 13th 2022
5 Min Read

Key Points

  • There are numerous factors to consider before deciding to invest in cryptos. 
  • Considering portfolio goals, risk profiles, and personal convictions before investing helps reduce risk and increase returns. 
  • Researching and understanding the market is of utmost importance before buying any digital asset. 


While 2021 was a good year for many digital assets, 2022 was equally, if not more, brutal. The Fed’s war on inflation, crypto regulations, the Russia-Ukraine war, the looming fear of recession, and numerous other macroeconomic factors have affected the price of cryptos. As a result, Bitcoin went significantly down from its all-time high to hovering below $16k at one point. 

But now the question is whether all this market chaos will come to an end in the new year. If so, what are some of the key points to consider before you buy crypto in 2023? Read on to understand the 5 significant questions every investor should consider before beginning their investment journey in 2023. 


1. Do you know the importance of emergency funds?

A significant part of enhancing and securing your financial health is having a sufficient emergency fund. These funds are set aside to help you out in any unexpected scenarios. Just like any other investment, the main thing to consider before you buy your crypto is to have an emergency fund accessible, which is worth almost three to six months of savings. 

Given the highly volatile nature of cryptos, the prices of coins that you might have invested in could fall drastically. Therefore, if you are forced to sell a specific crypto when it's worth almost 80% less than you bought it for, you do not have a chance of benefiting from it. On the other hand, if you have sufficient emergency funds, you can easily tap into them instead of completely selling your investment for loss or taking debt. 

buy cryptos

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

2. Are you looking for a long-term investment?

Another crucial question to consider before you buy crypto in 2023 is your type of investment, whether you are looking for a long-term or a short-term investment. Investments like crypto are likely to give you higher returns over time. For instance, if you bought a BTC worth $1000 in 2017 and held on to that same, you could be a millionaire by today!

The HODL strategy or holding of the required asset for a longer duration needs a lot of patience. Investors can easily get trapped in fear or FOMO during a crypto winter and sell their holdings for loss. But quality investments are bound to surge. The longer the period of holding, the higher the gains. For this, you need to believe in the long-term potential of your specific digital currency and blockchain technology. 


3. Is cryptocurrency a part of your diversified portfolio?

Diversifying your portfolio and allocating assets is arguably the foremost pillar of investing. This helps in balancing risk versus reward by holding varying percentages of different assets. A diversified portfolio can also help crypto investors to minimize the risks and overall price volatility of their holdings. 

Experts and analysts always recommend maintaining cryptocurrency as a part of their diversified portfolio without going for all of it. According to them, cryptos should make up at most 5% of your investments if you are a beginner. Therefore, reallocating at least some of the portfolio to more stable asset classes might help iron out the unpredictability of your overall holdings.


4. What is your plan?

The most fundamental question to consider before you buy crypto in 2023 is why you are doing it and what the plan is. When it comes to crypto investments, one of the many biggest challenges is not getting lost in the hype. Anyone can buy a bunch of crypto coins, but the key to profitable returns is to utilize a strategy or invest according to an investment plan. 

Numerous crypto strategies are available today, each with risks and benefits. A smart investment plan is customized according to your risk tolerance level and a detailed understanding of the rapidly changing market trends and blockchain technology. 

buy cryptos

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

5. Are you well aware of the risks?

Given the volatility and uncertainty of crypto investing, there can be a lot of upsides, but the downsides can be sudden, sharp, and highly risky. Against this backdrop, one thing to consider before you buy any crypto is that you understand the risk and limit your investments to an amount you can afford to lose. 

These are some of the most common risks within the crypto investment sector. Firstly, digital currency is highly speculative, as it can hit the sky one day and the very next day hit rock bottom. Several macroeconomic factors like crypto regulations, fear of recession, war, or even increased hype can cause near-term volatility. Also, 2022 has proven that the failure or hack of crypto exchanges can also affect the price rally of major cryptocurrencies and altcoins. The collapse of FTX was one of the most drastic disasters in financial history, further worsening the overall bearish market.

However, if you are well aware of the risk factors, there are multiple ways to mitigate the risks.


The Bottomline 

Although these are the top 5 questions to consider before buying crypto in 2023, investing wisely and doing adequate research is always recommended. Digital currencies have slowly become an integral part of many investors’ portfolios, and understanding the nature of the market before investing can help you generate profitable returns.

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