Could Crypto Protect You In A Stock Market Crash? | Smart change: personal finance
A separate investment, but no less risk
You might think that investing in cryptocurrency is a good way to hedge your bets in case the stocks get beaten, and that’s not a bad theory. The reality is that cryptocurrencies don’t necessarily move with the stock market, so you might find yourself in a situation where your stock portfolio is down but your crypto investments are up.
Likewise, cryptocurrencies, like stocks, can be bought and sold. If your equity investments take a hit and you need cash, liquidating some crypto positions could give you access to cash without having to mine your stock portfolio when it is down.
But make no mistake: Cryptocurrency is still a very speculative and risky investment, and while it might seem like a good way to protect yourself from volatile stock markets, this strategy could easily backfire. After all, what happens when the value of stocks drops at the same time the cryptocurrency market experiences its own upheaval? At this point, you could be hit with a double whammy.
While it’s a good idea to hold investments other than stocks to protect against a market meltdown, cryptocurrency isn’t necessarily your best bet in this regard. A more stable alternative may in fact be real estate. The real estate market also tends to operate independently of the stock market, and if you take the money you plan to invest in cryptocurrency and use it to buy an income property, for example, you will get a steady stream of rental income. for yourself which can serve as a source of financial security if stock values fall.