Essential Things You Must Know About CryptoCurrencies
This article will show you three essential things you must know about cryptocurrency before you invest. Digital currencies, unlike many other investments, are incredibly complex and risky.
Cryptocurrencies like Bitcoin and Ethereum are intriguing because they are unregulated by governments, have limited supply and privacy in financial transactions. However, they are also extremely complicated to understand and can only be purchased through specific online venues. Crypto is also no longer cheap. Experts explain that this hike in the price of viable cryptocurrencies makes them a very risky investment.
Here are the essential things you must keep in mind when investing in any cryptocurrency.
Don’t Buy CryptoCurrency Because It’s Trendy
You have to know how to decipher between investing and speculating. If you decide to become an investor in cryptocurrency, only do so with what you can afford to lose and always have an exit strategy.
Also, keep your eye out for cryptocurrencies surrounded by less hype that have the potential to build on Bitcoin’s strengths.
Know The Technology
If you are interested in investing in cryptocurrency, you should know how the technology works, how you can use it, and the value it creates.
The quickest way for an investor to lose money is to buy into an asset class that they don’t understand.
You also need to understand the fundamentals, like the fact that blockchain is a technology anyone can use. While cryptocurrencies are store values, just like other currencies, that makes their value little to do with the underlying technology.
Keep on Top of Regulatory Attempts
Soon more and more governments will start to announce plans to regulate Bitcoin and other cryptocurrencies by controlling the transfer of money in and out of the blockchain. This also means that they could launch a major investigation to target the more than N100m in unpaid taxes related to cryptocurrency profits.
Potential investors need to determine if there are compliance risks, legal issues, and regulatory risks before investing in cryptocurrencies. The key to understanding these risks is transparency.
When investing in cryptocurrencies, you must understand that what goes up can also come down.
Volatility goes both ways, which means that your investment in digital currency can go back to zero just as quickly as it can go up to another $1,000.
Now, let us learn about how Blockchain technology works.
Before You Invest In Cryptocurrencies
In this section, you’ll learn four things you must know and understand before you invest your hard-earned money into cryptocurrency.
After years of unprecedented gains, the cryptocurrency market saw a dramatic drop in value in 2018. The market correction brought everything down and should make you a bit cautious with your crypto investments.
Here are four things that you should know before investing your hard-earned income in cryptocurrencies.
1. Understand the Risks
When investing in cryptocurrency, you must understand the inherent risks involved in these kinds of investments.
If you are looking to buy into an lCO, know that you are buying into a startup and that most startups fail. Also, it’s essential to understand that crypto markets are not regulated, making it easier for a few more prominent investors to corner the market, which will be bad for you.
2. Start Small
It can be exhilarating to watch the value of cryptocurrency quickly rise. However, because it is still a volatile market, you want to start small and avoid going in. You don’t test the water with both feet. Try to keep your exposure to crypto at a reasonable level. Your exposure limit will be different than anyone else’s. It should take into consideration your age, your income, and your level of wealth.
You also want to make sure to diversify your crypto holdings, and remember that the more you spread your investments, the more likely you’ll make a profit.
3. Be Picky
No matter the investment, a broad market correction will bring everything down, — both the good and the bad. Buying during a severe market correction means that you have the opportunity to shop around for great investments at a deep discount.
Pay attention to the drivers that support the currency price and go after tokens with a robust and fundamental demand for the platform they support.
4. Don’t Be Lazy
If you are dead set on buying ICO, you need to do a lot of research and get the dirty work done. In the first half of 2018 alone, more than 600 ICOs went to market, creating many whitepapers to analyze. Before investing in these, you need to ensure that you are good at distinguishing a promising startup from a bad one…
You need to look at the founders, analyze their expertise and track record, and determine if specific organizations are backing the blockchain application.
Don’t let the current downward trend keep you from considering investing in cryptocurrency. With the right amount of research and understanding, you can still invest in cryptocurrency and make a profit.
Top Things To Avoid In Cryptocurrency
Investing in cryptocurrency is relatively new that, if careful, investors can consider when they are looking to diversify their assets.
However, before you dive in and start investing in cryptocurrency, you should consider these five things to avoid when investing, so you can make the smartest decision to meet your needs.
Not Considering Problems of Fraud and Security
Cryptocurrency is steeped in digital technology, with every transaction, from mining to selling and buying, taking place online. This can pose a serious threat, according to regulators. Because you can easily fall into the trap of participating in fake exchanges.
Do your research and verify the legitimacy of the exchanges and their security processes for all transactions.
Avoid High Fees
One way that you may be able to avoid the high fees associated with trading cryptocurrencies is by buying and selling through a cryptocurrency wallet.
This is something that you can download on your smartphone. While cryptocurrency wallets still have transaction fees, they won’t be nearly as high as an exchange fee.
Avoid Buying Derivatives
When looking for your next cryptocurrency investment, crypto derivatives trading may not be the way to go.
Derivatives, including Bitcoin futures, have the potential for more significant losses. While it’s impossible to predict the crypto market, you can utilize smart investing practices to save you from making a detrimental investment.
Cashing It All In
Diversifying your portfolio can be your guarantee against losing everything. Cryptocurrency has become known for its volatile nature. And its unpredictability regarding returns can either provide you a huge profit or a devastating loss.
Selling When Emotionally Hyped
When trading in digital currencies, it’s best to remain level-headed as much as possible. When you continuously re-evaluate your position, you can determine the best strategy to make. Also, it’s best to keep in mind that you don’t want to invest more than you can afford to lose when investing in cryptocurrencies.
When it comes to investing in cryptocurrency, you need to follow no hard or fast rules. Always take the time to do the research and always think twice before making a decision. Make sure that you are taking the necessary time to make the best choices for your specific situation.