To help you avoid a bad investment, we made a list of the 15 important things you should know before your first digital currency investment.
Cryptocurrency is all the rage. Every other day, a new story appears in the media about a layman cryptocurrency investor turned millionaire, about its increasing popularity and influence or about how it has given birth to a possible whole new world.
- Considering these factors, it is not hard to fathom why investments are being directed towards cryptocurrency, by the young and old alike.
- However, this sudden surge of investment in this new and emerging field has also given rise to a plethora of mistakes, committed equally by rookies and those trying to get a firmer grip on this topic.
- A common problem appears to be the lack of homework they put in, which often leads them to make bad investments, falling for scams and trading too often, among many other mistakes.
Here is our list you should check before your digital currency investment:
1. Only invest the amount, which you can lose
The only safe bet is the one in which the pros outweigh the cons, ideally by a long margin. Investing ALL your money in one basket may seem smart at the time, but no matter how enticing the opportunity may be, DON’T. While you may go on to profit a lot, but don’t forget that the upside is that you may go broke. Therefore, never invest your savings. So, the key here is, to invest only as much as you can stand to lose, no more.
2. Beware of Fomo (fear of missing out)
While the fear of losing will never allow you to invest, the relatively unknown fear of missing out will encourage you to make hasty investments, both of which can be equally damaging. When making an investment, take your time to research and come to a conclusion, then stick with it. The fear of missing out makes you go against logic and invest in every opportunity you see so if your only reason for investing is the fear of missing out then it is best to stay away.
3. Don’t put all your eggs in one basket
When investing, the best way to come out unscathed and ensure some profit is to invest in a diversity of sectors. You may get inclines to invest all your money in one cryptocurrency, but a market is an unpredictable place. What might be up one day, could be down the other? So, the best choice here if you must invest in only one cryptocurrency to go with the safest bet, bitcoin. Bitcoin is relatively stable, highly valued and is highly practical in today’s world.
4. Don’t invest in “cheap” cryptocurrencies
The high price of the famous currencies may have you searching for other options, and the low prices of some may have you thinking of investing in them. But don’t let the cheap prices fool you into making bad decisions. Though you may be able to buy a lot, the chances are that your investment won’t be worth much, so it is better to buy few valuable coins as opposed to a bulk of very cheap ones. To put things into perspective, 0.1 bitcoin is worth more than 150 000 000 dogecoins.
5. Investing regularly with small amounts
Similar to the mistake of investing all in one market, investing all your money at the same time can also be damaging. When investing, the key is to invest regularly, but only with small amounts, this helps you keep track of and gain from the fluctuating market without concurring any huge losses.
6. Beware of scam ICO projects
Learning from one’s mistakes is no doubt smart but avoiding those mistakes, by doing your research, is undoubtedly the smarter thing to do. The eagerness of the masses to invest in cryptocurrency has given rise to a dedicated market whose only job is to scam you of your money by duping you fraudulent claims and statistic. They start with an Initial Coin Offering (ICO) and look, but the red flags are always there for those willing to look for them.
7. Aim for low volatility
Volatility is the standard deviation in price change of a stock’s price against its price at any given time. To understand volatility, one must know the bid and ask system. The bid price represents the maximum price that a buyer is willing to pay for security while the asking price represents the minimum price that a seller is willing to receive. Once the buyer and seller agree on a price, that is its set security. High volatility means that the security amount may increase, thus knowing the volatility rate before investing is imperative.
8. Buy for good price and hold it till you reach your target
Knowing what and when to buy in the crypto world, is no use if you don‘t know when to sell. The best policy to adopt is to buy at a good price and set an aim of how much you want to profit or how long you think it will stay profitable, that is now your fixed point to sell.
9. Don’t trade daily
Patience is a virtue, and in the investment market, it is a necessity. The stocks take their time, and if you don’t have the patience to bear with them on this journey, then you will also not be reaping any rewards. Don’t get disheartened or overjoyed easily, as your emotions may guide you to trade daily. But daily trading is highly discouraged as 90% people lose their funds this way.
10. Buy bitcoin after a big correction
A market correction is a term used to define the state of the market when it sees a price decline of about 10%. Shares during this time are highly volatile and prone to lose. Thus, the best time to buy is once the correction has subsided as now the market is bound to rise.
11. Sell if the price grows for a long time
If your shares have been having an unbelievable streak of good luck, then it’s about time you realize that it truly is too good to be true. Prices can NEVER remain stagnant, and all that goes up must come down. So if your investment has been going good for too long then be grateful for the profit and sell the share, as the only way for it to go now is down.
12. Do your research
A commonly perpetrated myth is that investment is a game of chance. But no, if you do your research and play your cards accordingly, then “luck” is bound to be on your side. But if your inexperience in this field is making this hard, then bitcoin is surely your best choice in the crypto world.
13. Don’t hold your funds on exchanges
Cryptocurrency exchange is a platform to buy/sell crypto but under no circumstances should be used to store your money too. Exchanges are prone to hacking, bankruptcy and deprive you of complete control. Once you have bought the currency, it is imperative that you store in a cryptocurrency wallet, a software program meant to keep check of it. The market offers a great variety of wallet to suit your needs.
14. Don’t over- check your portfolio
Don’t check your portfolio every day, hour, second! As mentioned earlier, patience is key. The market, though volatile and unpredictable, still needs time actually to show a fluctuation. Your constant checking won’t get you the outcome you want. Thus making the mistake of checking your portfolio too frequently will not only leave you incapable of carrying out your daily activities but also waste a great deal of your time and energy.
15. Keep your expectations under check
Last but not least, the advice that wraps this all up is: Don’t have big expectations. You will not be under stress. On your part, the most you can do is to invest fully in your research and then make your decisions accordingly. After that, it is anybody’s game! The outcomes of the cryptocurrency investment market are multifactorial. Thus it is best not to have big expectations rather be optimistic and learn from your mistakes. Unrealistic expectations are bound to stress you out, and stress can never be fruitful.
The stable owners of yesteryears would have laughed at you had you tried to warn them that cars would one day make horse driven carriages obsolete. Similarly, the generators of electricity would have never guessed that it would completely run the world of today. But unlike them, YOU, today, stand a chance to invest in cryptocurrency. A technology that similar to cars, smartphones, and fridge will one day reach 100% adoption by the masses.
Given its youth, now is undoubtedly the best time to invest in crypto, an investment that will surely bear you rich fruits someday. This may seem like merely another investment advice, but as you can tell from the undeniable proofs I have provided, that is the cumulation of my investment experience and knowledge.