Given the high market volatility and unpredictability issues, investing in cryptocurrencies is one of the biggest challenges for investors who cannot keep up with the latest trends and news. This is why analysts and financial advisors continuously caution investors against putting large amounts of money at stake.
The good news is if you invest in a reputed and safe cryptocurrency like Bitcoin and Ethereum, the risks are much lower compared to the thousands of other coins available today. Digital currencies and other virtual assets have witnessed a rapid increase in their prominence and are added to more investor portfolios.
If you are planning to invest in cryptocurrencies, here are certain things to know before making any major decision. We have covered the most important things you need to consider before investing in crypto or entering the blockchain market.
5 Things To Know As a Crypto Investor
Before making crypto investments, it’s essential to self-speculate about what you need and wishes to achieve. Here are the top 5 things you must know about cryptocurrencies.
1. Determine Why You Are Making this Investment
Determining the objective of your investment is one of the most important questions that you need to ask before making a crypto investment. Are you interested in crypto investment because it’s trendy or passionate about it? Different investors have different investment goals to fulfill their personal needs and interests. So, try to understand why you want to invest in crypto.
2. Is it a Good Idea to Invest in Cryptocurrency?
Although cryptocurrency is risky, it can turn out to be highly profitable and rewarding. Many experienced investors consider it a good investment option, especially when they are willing to gain good exposure to digital currency. However, if you are a newbie, you can buy various stocks of reputable companies having direct exposure to cryptocurrency to play safe.
Many investors, however, believe that cryptocurrencies don’t have a proper cash flow like fiat money and hence don’t consider them as real investments. Besides, to reap the profits and rewards, someone usually has to pay more than you did. This concept is known as “the greater fool” investment theory.
But apart from all these aspects and risks, cryptocurrency is highly valuable, and if you do it right, you can reap huge rewards. Cryptocurrency can change the upcoming generations for the better.
3. How to Invest in Cryptocurrency?
You can easily purchase certain crypto coins like Bitcoin using fiat currency However, several others need to be purchased by using stable coins like USDT.
Moreover, you will need a digital wallet to buy crypto coins and hold or store them in a secure place. A wallet is an online app designed to hold your currency – be it cryptocurrency or fiat money. After purchasing a certain crypto value, you can safely store your coins in this digital wallet. Platforms like Coingate allow you to invest and trade in crypto in a safer and more stable environment.
You will also be required to create an exchange or an account to transfer fiat money for buying your desired cryptocurrencies. This is because you need to fund your crypto using real money. However, choose your exchange wisely and ensure a safe, flexible, and transparent environment.
4. How To Protect Yourself Against the Risks?
As mentioned earlier, crypto involves some market risks like volatility and theft. However, it’s possible to protect yourself against these threats by considering the following if you buy crypto coins in an ICO –
- Check who’s the owner of the company. Is the person reputable or trustworthy? If you notice a positive sign, go ahead.
- Decide whether you would like to buy tokens or own a stake in the company? While the former means you can use your coins, the latter signifies you can share the company’s earnings.
- Is the currency you invest in already developed and famous in the market, or is it relatively new? Try to avoid newly introduced coins in the market as you don’t know the associated risks.
Talking of Bitcoin has a history of huge price volatility. In February 2021, its value had reached $65,000, which is the highest to date, before falling again. The best solution to avoid risks is to invest in recognized and successful currencies like Bitcoin, Ethereum, Binance Coin, or Tether.
5. How Much Should You Invest in Cryptocurrency?
Investing in digital currencies is a considerable risk and you should never invest more than what you afford to lose. There will always be beginner’s luck in the starting, but it’s not necessary; it works all the time. The crypto market is very turbulent, and you need to know a lot of things before jumping into crypto trading. While trading live, you learn many things, so hold your horses and invest wisely and according to your pocket. For this, preparing yourself by studying charts and trends is an excellent way to understand how the market works.
Cryptocurrency is no doubt the future currency, so if you are planning a crypto investment, go ahead after assessing the risks and doing your homework well. Also, make sure to invest in a currency that’s relatively stable and secure compared to other digital assets.