Investing in Cryptocurrency: Understanding the Basics
Whether you are an investor or not, there is a good chance that you have heard about cryptocurrency. You might’ve heard Tesla’s CEO Elon Musk talk about it or might’ve seen someone share about it on social media. Either way, it seems like for the time being, it is here to stay and is a way that some investors are turning a profit.
Before you jump right into investing, though, there are a few things to consider when it comes to investing in cryptocurrency. Hopefully, this article will help to highlight them for you. And whether you are looking to invest or simply want to learn a little bit more about crypto and what the hype is all about, this article will get you headed in the right direction.
8 Tips for Investing in Cryptocurrency:
Only Invest What You Are Willing to Lose
Like most investments, every investor takes a certain risk when they choose to invest their money. Crypto can be especially risky in certain situations because it is new and is ever adjusting and shaping itself. This does not mean that you should stay away from it completely, but you need to make sure that you are using safe investment strategies.
A big key to this is not over-leveraging yourself, especially if you are just starting. Instead, decide on a sum that you would be able to lose and invest and grow that account. This will keep your overall finances protected.
Always Do Your Research
Before investing in cryptocurrency, be willing to spend time doing the needed research. Spend time studying the project, its mission, the development team, and its goals. Try to determine the true value of your investment – the fact that “someone is willing to buy bitcoin or other coins at a higher price” is not in itself a satisfactory reason to invest.
How do you do your research? Start with CoinMarketCap service – study coin metrics in the form of maximum quantity, issuance mechanism, trading volumes, available exchanges, and so on. Outside of reading the regular news websites, spend some extra time reading up on the latest cryptocurrency news as well. This will help you to make informed decisions on future cryptocurrency investments.
FOMO or Fear Of Missing Out is a feeling of missing out on something and then deciding based on emotion rather than strategy. Roughly speaking, it is the feeling of “the train has already left,” and you will never make big money in the cryptocurrency industry again. In fact, this is a false perception of newcomers about the market – there will be more opportunities in the future to profit; you just need to be patient and let them come to you.
If it Sounds Too Good to be True, it Is
Unfortunately, the cryptocurrency market is rife with scammers, hackers, and all sorts of unscrupulous individuals (this is one of the negatives of the market). Just because someone promises something doesn’t mean that they will deliver. It is up to you to make sure to do your research, limit your liability, and then make strategic investments.
Verify Your Investments
To add to the last point, you must be able to verify your investments. Fake cryptocurrency giveaways are a way that scammers take money from unsuspecting investors. These schemes allow scammers to earn tens of millions of dollars every year from new victims.
You may have seen messages on Twitter about “free” coins handed out on behalf of celebrities or a message that promises to double the amount of the sent cryptocurrency. Don’t fall for them! All of these postings are fake and are used to lure gullible newcomers. So make sure that you are not one of them.
Don’t Only Focus on the Price Per Coin
Another common mistake for newbies is interpreting the value of coins in terms of dollars, Euros, etc. For example, coins priced in a few cents arouse more interest than Bitcoin because they are supposedly “cheaper.” In reality, your investment could still go up or down regardless of how much your original cryptocurrency is worth.
For example, you could purchase part of a bitcoin for thousands of dollars or purchase a large amount of another cryptocurrency for fractions of a cent for each one. From here, your investment could go up or down, and you could make or lose money. The crypto you bought for fractions of a cent could work its way up to be worth a dollar per coin, and now your investment has just skyrocketed. Or, the coin that you purchased a part of worth thousands of dollars could also climb, and you could make money.
On the flip side, either or both cryptocurrencies could drop, and you could also lose money on your investment. This goes back to you taking ownership of your investment and being willing to research before you invest.
Secure Your Investments
Cryptocurrencies are an asset, the full responsibility for the security of which falls on its owner’s shoulders. The sole ownership is determined by whether only one user has private keys and other secret combinations to his wallets. If cryptocurrency is placed on third-party platforms, exchanges, and other services – there is always a possibility of its irretrievable loss from hackers.
The crypto sphere has almost no mechanisms in place to protect users from hacks and reimburse potential losses. Therefore, try not to keep most of your cryptocurrencies on exchanges. It is best to use cold hardware wallets for this purpose.
In addition to hacking incidents, exchanges can also block your ability to withdraw funds for various reasons, citing anti-money laundering regulations or solvency issues. Beyond that, some exchanges simply don’t have the infrastructure needed to operate consistently. Conclusion: if you don’t have your own wallet, you don’t have a hundred percent guarantee that your money is secure.
You Don’t Have to Buy a Whole Coin
When it comes to investing in a certain cryptocurrency, you don’t have to buy an entire coin to invest and make money. When it comes to a crypto like Bitcoin, the price is up in the tens of thousands for a coin. That doesn’t mean you must spend all that money; you can purchase part of a coin that can grow or fall over time. Just because you see a coin worth X dollars doesn’t mean you have to buy the entire coin. You can choose to buy a smaller portion of the coin that can increase or decrease in value over time.
8 Tips for Investing in Cryptocurrency Conclusion
As with anything new, there will be a learning curve as you go. Hopefully, though, these 8 tips for investing in cryptocurrency will help get you started in the right direction. There are plenty of other excellent cryptocurrency resources out there, so make sure to take advantage of them and all that they have to offer.
The other great thing about investing is that it doesn’t have to be your full-time job. So enjoy the process and learn as you go.
*** Any investment assumes certain risks, and Lists For All is not responsible for any loss or profits. This article is meant only to highlight some of the basics of Cryptocurrency.