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These days, it seems that everyone is investing in cryptocurrency. The digital currency market has risen dramatically over the last few years and everywhere you look, it feels like everyone is not only talking about crypto, but buying into it too.
The cryptocurrency market is still quite an unfamiliar area to many people, but that has not stopped investors showing a growing interest in it recently. While digital currencies such as Bitcoin experienced a rise in value in 2017, this plummeted within a year. However, while Bitcoin’s value has since continued to be volatile on the stock market, newer cryptocurrencies have started to emerge that are showing to be significantly lucrative for investors.
So, how do you invest in cryptocurrency? What should you ensure you do, and what should you avoid? Before you take a risk with your cash, have a look at our dos and don’ts of investing in digital currency.
Do Assess the Risks
Before you invest in cryptocurrency, make sure you know the risks involved. The crypto market is still relatively new territory and can be risky, so take that into account. Remember, cryptocurrencies are not, as yet, legal tender in the UK and USA and are not properly regulated. Therefore, if anything should go wrong with your investment, then there is no protection or recourse.
Developing a trading plan based on research should help you on deciding what crypto currencies to back. Your plan should cover all the essentials, such as entry and exit plans, your trading goals, and risk management strategies. What is your main objective with regards to your investment? In addition, how are you going to achieve that? Attempting to trade without a plan is exceptionally risky and is essentially gambling with your money.
Do Not Buy into the Unknown
It might sound obvious, but do not invest in a cryptocurrency if you do not know all the details about it. You must do your research thoroughly before you make any decisions to part with your cash. You would not buy a car without knowing everything about it, so investing in digital currency should not be any different. Learn as much as you possibly can about the currency that you are interested in. Consider who is behind the crypto, what the company’s goals and purposes are — everything that can help give you a bigger overall picture.
Do Have an Understanding
While it is vitally important to do your research on the crypto market, as well as the currencies you are interested in, it is even more crucial that you actually understand the information you are gathering. Having a solid understanding of how the blockchain industry works, as well as an awareness of what opportunities and obstacles might arise, will set you on the right path before you invest. For instance, it is a good idea to be aware of when to expect alt season, so that you can take full advantage of it when it comes round.
Do Use a Reliable Trading Exchange
If you are intending to trade in cryptocurrency, you will need to use a designated crypto exchange. These trading platforms work a bit like stockbrokers, providing traders with the tools to buy and sell cryptocurrencies.
There is no shortage of trading exchanges that deal in digital currency, but make sure that you use one that is reputable and trusted. The best exchanges make buying and selling easy to do and have strong security features and low fees. Carefully research the platform you are interested in buying from before you make an informed decision. Look at customer reviews and read what other people are saying about it on public discussion forums, such as Reddit.
Don’t Be Impulsive
You might be tempted to buy the latest cryptocurrency that everyone else seems to be investing in, but stop and think first. As with any investment, impulse buys can result in heartache. Consider your decisions carefully, based on your research and any experience, and attempt to understand the cryptocurrency you are interested in.
Make sure you look at your own situation, rather than someone else’s experience before you decide. Just because one person made impressive returns on an investment does not mean that you will too. Be particularly wary of endorsements from celebrities or online influencers. They might be part of a pump-and-dump scheme, which we will discuss more in-depth below. Always be cautious with your decisions and keep your wits about you.
Do Be Vigilant
Beware of crypto pump-and-dump schemes, which use deceptive means in order to boost a cryptocurrency’s security or stock price. Operators of such scams will acquire large investments within a particular cryptocurrency. They will then rely on false or misleading recommendations — for instance from social media influencers — to try and lure people into investing in the crypto in order to “pump” up its stock market value. The scammers will then sell their share after the hype has resulted in an increased share price for them. Do not blindly follow your favorite influencer or celebrity into parting with your hard-earned money — it might just cost you a lot in the long term.
Also, be aware of initial coin offerings — or ICOs — when a new crypto platform mints its first batch of coins for mass distribution. While these companies might promise incredible returns, they still have no proven track record. If something seems too good to be true, then it probably is.
As with any investment, putting your money into cryptocurrency will come with a degree of risk. As long as you follow the advice on what to consider and what to avoid, you should feel confident about taking the plunge and investing.
The post The Dos and Don’ts of Investing in Cryptocurrency appeared first on Home Business Magazine.
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