With the rising popularity of cryptocurrency today, there’s no doubt that more and more people are getting interested in investing in this asset. The growing demand and acceptance in many countries have led cryptocurrencies to be a part of viable investments for 2021.
However, even if cryptocurrency might sound exciting and tempting, it’s wise to know some things about it first:
One of the things you should know about cryptocurrency investing is that the crypto market isn’t regulated. For those who want to invest massively without dealing with various obstacles, cryptocurrency investing is good.
However, for those who are not willing to take risks, you need to be cautious about investing your money in cryptocurrencies. With this in mind, it’s best to do your homework first before you put all your money into this digital asset.
If you’re new to the concept of cryptocurrency investment, make sure to keep local laws in mind so that you have an idea about what to expect before you visit any platform. Another way is to learn the ins and outs of the process by playing a crypto trading game.
Expect The Unexpected
The prices of cryptocurrencies fluctuate differently compared to mainstream investments. As an investor, you should never ignore the fact that significant volatility exists in the cryptocurrency market.
The value of cryptocurrencies is contingent upon demand, supply, and people’s faith that they carry value. For instance, if the demand for Bitcoin increases, its value or price will also increase. However, if its demand drops, expect that its value or price will also decrease.
Most experienced investors are already accustomed to big price swings that some don’t usually find in the traditional markets. By being prepared for such terrifying and unfavorable circumstances, you have to be an intelligent cryptocurrency investor to act rationally when the price drops.
Diversify Your Cryptocurrency Investing Portfolio
When it comes to cryptocurrency investing, do your best to avoid a common cryptocurrency pitfall, which is investing everything in one basket. To enjoy a better and healthy cryptocurrency, diversification is crucial.
For example, Bitcoin is one of the known cryptocurrencies in the industry. Unfortunately, it has plummeted in the past several months. So, don’t put your trust in a single cryptocurrency. If you consider diversification in cryptocurrency investing, you’re spreading the risks evenly. It means that if a digital currency goes through a rough patch, the other cryptocurrencies you have may help you recover the losses.
More often than not, other investors follow a 6:3:1 strategy, which means 60% is invested in Bitcoin, 30% is for Ethereum, and the remaining 10% is for the altcoins. But this may vary depending on your style as an investor. If you want to try other strategies in cryptocurrency investing, do your research and explore the full potential of the available cryptocurrencies.
Can Be Difficult to Predict Cryptocurrency Returns
Given the speculative nature of cryptocurrencies and the fact that it’s new for most investors, it can be difficult to determine the returns. For example, cryptocurrency investors don’t have years of performance data to look back on and earnings reports to check.
For this reason, you should keep your expectations in check when it comes to cryptocurrency investing. Although profits are possible, you should also know that losses are also a possibility.
Avoid A Bad Investment or Trade Strategy
For cryptocurrency investors, a common mistake is participating in a pump and dump group. Social media gurus or communities may even promise tips about certain coins. You should avoid such communities or groups if you don’t want to end up losing your money quickly.
If you want to earn better returns and avoid losses as much as possible, try to learn the different strategies available and check out which works best for you. But, before you experiment with any strategy, know how much you’re willing to spend or what you can afford to lose. With this, you’ll be able to avoid big losses and enjoy more gains.
Be Careful with Mobile Wallets
Storing or trading a huge amount of cryptocurrencies on mobile devices is a big risk. The reason behind this is that mobile devices are prone to be compromised physically or electronically.
Even if it’s convenient for most investors, security is something you should prioritize over convenience. So, if you’re using mobile wallets for cryptocurrency investing, always be careful and choose the one that’s proven to be able to protect your digital assets.
If you’re just getting started, don’t hesitate to shop around for the best cryptocurrency or Bitcoin wallet available in today’s market and compare the ones you prefer.
Timing Is the Key
Once you have invested some of your money in cryptocurrency, you should pay attention to the right timing. Keep in mind that digital currencies move quickly and are highly volatile.
For instance, if you think buying a new cryptocurrency before it becomes popular and more valuable is a wise move, better think twice. This is because, in reality, you’ll get better results if you monitor the market first before you make a move.
Take note that cryptocurrencies tend to follow price patterns. For example, Bitcoin typically leads the way, which follows a general trajectory. The news about price manipulation, exchange hack, and fraud can send shockwaves in the world of cryptocurrencies. In this case, it’s crucial to watch out for everything involved in the cryptocurrency market to achieve success and get good returns instead.
Always Read the White Papers of Cryptocurrency
When investing in cryptocurrency, always spend more time reading the white papers. Each cryptocurrency has one, and it must be accessible and available for you. If they’re not available, consider it a red flag.
White papers must tell you everything regarding the developers’ plan for their cryptocurrencies. Typically, they include the specifics, general overview, and timeframe of a certain cryptocurrency. If the white papers don’t contain specific details and data about the cryptocurrency, you should be cautious about it.
White papers are the chance for the development team to lay out everything to improve their cryptocurrency. If something feels misleading and incomplete, it speaks to the possible concerns related to cryptocurrency.
Cryptocurrency investing is a great venture for people who are looking for investments. However, as an investor, you have to be aware of the possible risks of investing in cryptocurrency, and it’s wise to keep the guidelines and basic rules of investing in mind. With this, you won’t only be able to minimize risks, but you’ll also be smart with all your investment decisions.