Are you interested in trading in crypto-currencies? Before putting your money in it, you will have to take into account several factors. Because you might risk losing your investment if you do this without a thought. There's a wide universe of cryptocurrencies that does not stop at Blockchain or Bitcoin. To hope to expand your savings, you will need to know some important factors and also use common sense. We will lead you to step by step through these diverse tips to make your first investments. Let's look through all the relevant points in depth that need to be taken care of before depositing your money to purchase cryptocurrencies.
1. Don’t invest in things that you do not understand
Don't gamble your hard-earned money without knowing what you're getting into. Get to know the benefits and drawbacks of investing in crypto-currencies. You should just start looking at Dos and Don’ts of investing and should not start until you understand the risks and rewards entirely. Once you have a clear understanding of the Dos and Don’ts, you can start investing.
2. Carry out research
If you plan to invest in cryptocurrencies, make sure that you spend at least 24 hours learning what blockchain is, what cryptocurrencies are, security precautions you can take before investing in cryptocurrencies, etc. You need to make yourself well aware of all the crypto terms and crypto glossary. Please note that no study is adequate and you need to keep continuously updating yourself. What may have been accurate a few months ago might not be applicable now. Technology, finance, investment policies, legislation, and everything else about cryptos are evolving so rapidly that you need to update yourself on a regular basis. It's called DYOR in crypto lingo: Do your own analysis.
3. Get hands-on knowledge
Many individuals recommend spending a lot of time understanding blockchain, cryptocurrency, and trading. In order to get your hands dirty and learn to play with real money and real trades, I would recommend an alternative solution where you play around with a small sum. My proposal is to play around with a small sum that you consider to be meager. Create accounts, buy bitcoin, buy altcoins, do some trading, take part in a successful ICO, etc. With a small sum, you can do all of these and once you're happy then you can pull in the big money. Learn about FUD & FOMO. Make sure that either of them does not affect you. These will be the two words in the crypto markets that you will hear most often. What will give you peace of mind is that you decide not to be swayed by any of these.
4. Fear of losing out
Between November 2017 and Jan 2018, there were hordes of individuals entering cryptocurrencies. It was such a bull market that none of the new investors had enough time prior to investing to know the market. It was one mad bull run where, in less than a week, some people doubled and tripled their cash. They didn't want to miss the chance to hear such stories. Many of them will be wrecked today as Bitcoin is at a lower rate today as compared to its all-time high. This is a 66 % correction compared to the BTC all-time high of $20089 that most of them were not ready for. They would not have entered at such high levels if they had known that crypto education holds a significant factor in deciding your chances at success at it. Or if they had wanted to enter at such high levels, they would have been prepared for the lows.
5. Diversify the amount
This will concentrate on diversification, after our pre-investment tips. In several facets of your life, this notion is relevant and it is also true for crypto-currencies. You have to remember the expression that if you have money to spend, you should not put all your eggs in one basket. You will break all your eggs if your basket falls to the deck, and you lose everything. You would have lost just 2 eggs if you had 10 eggs split equally into 5 baskets. Therefore, for your investments, it is reasonable to apply similar logic. You should have them separated as follows:
- Real estate.
- Others on actions.
- Part in cryptocurrency.
In the same way, this idea should also apply to the part that concerns your investment. Diversifying your investment through various cryptocurrencies would be essential. The aim is to bring down the risk to the minimum.
6. Join relevant Facebook groups
Keeping up to date with all that is happenings in the Cryptosphere can be really hard. There are way too many groups on Facebook and Telegram. Identifying the good ones is really hard before you have joined them. I would recommend against initially joining Telegram groups as there would be a lot of noise and sometimes it can get annoying. I would recommend that you stick to two Facebook groups before you get a sense of things and you are prepared to open the data flood gates.
7. Be cautious against joining the Pump and Dump groups
P&D groups are known to easily burn your investment. By offering 2x to 5x returns every day, they typically promote their groups. Thought with a couple of P&D, you could get lucky and could also make money. However, do not fall into the pit, though this can be quite tempting. For two reasons, I would argue against joining this party.
One, it is wrong. They try to control the markets and you help them to do that.
Two, it's going to hurt your investment.
These kinds of groups are nothing more than market manipulators.
8. Track your funds
Our 8th point will clarify how to navigate the evolution of your portfolio now that we have seen all the best practices for investing correctly in cryptocurrencies.
3 scenarios can occur after investing in a project:
1. You earn money
2. Your investment appears to be stable
3. You lose your money
It can be difficult to track your results because you have to review each of your assets to see how they have progressed from the last moment you watched them. Luckily, there are smartphone apps that will allow you to automatically and instantly monitor your results. In order to do this, you will simply need to fill in the quantity and the type of cryptocurrency you have, the date of purchase, and the purchase value. These applications will then provide a wealth of data for you.
9. Only invest the amount that you can afford to lose
You will continue to hear this advice when you start with crypto education. The "Terms and Conditions" that you find on the websites are like this advice. Everybody signs it with "Terms and Conditions" but nobody reads it. With regard to the "Invest only what you can afford to lose" recommendation, everybody knows it, but no one follows it. There are many examples of individuals losing all their money, taking loans for investing & losing much of it, and not being able to pay the EMIs. You will be much more optimistic about the projects you have been studying when you don't have much to lose.
10. Securing the cryptocurrency
Our tenth and last tip is about your cryptocurrency's protection. You've always heard of Bitcoins stolen by hackers before. Unfortunately, these stories are real and have always been at the same level: on the cryptocurrency exchange. Therefore, it is recommended that you be especially careful and not stock your cryptocurrency on exchanges. It should be stored in what's called a cryptocurrency wallet. There are multiple choices for this:
- Metamask wallet for ERC-20 tokens
- A physical storage medium like the Nano S Ledger
- A specific portfolio for each crypto.
In this way, you can avoid almost any risk of losing your cryptocurrencies.
So we have reached the end of our guide to investing optimally in cryptocurrencies. The above tips will enable you to make the best possible investment. And, above all, it will save you from making errors that, from a financial point of view, might prove costly.