Since the idea of cryptocurrency has exploded, it has become one of many options for investing money. People are investing more and more into Bitcoin, Ether, and other cryptos.
However, being the most hyped doesn’t necessarily mean it’s the safest. While you’re carried away by the glowing stories on how cryptocurrencies have turned many into millionaires overnight, it can just be a welcome party for your upcoming misery.
Before you jump into cryptocurrencies based on some sheer testimonies of people, it’s essential that you are well prepared for it. The crypto-sphere is quite volatile and you really need to be careful while investing.
A Brief Idea on Cryptocurrencies
Since you’re thinking about investing in cryptocurrencies, the first step is to get a solid idea about it. A cryptocurrency is a digital currency that uses strong cryptography to secure the transaction.
Most of these virtual currencies are decentralized networks based on blockchain technology – a distributed ledger that works as a public financial transaction database.
It’s quite easy to exchange cryptocurrencies online using software or mobile apps that can provide crypto alerts about any particular currency. Also, due to the strong security system, cryptos are typically safe and immune to third-party interference.
Tips for Investing in Cryptocurrencies
It’s highly recommended that you do your homework before putting all your money into the crypto-sphere. If you’re still interested, there are some tips that you must follow to make the most out of your investment.
Do Proper Study
You may have some doubts about cryptocurrencies due to the dramatic decrease in bitcoins in December 2017, which caused a substantial loss to many people.
It happens when you do something out of FOMO. You forget to conduct a proper study and run into a huge debt. To make a profit from your investment, you must carry out deep research on that particular crypto.
In this way, you will be able to gain the necessary knowledge about the coin you want to invest in and understand its position in the crypto world.
Putting all your money on a cryptocurrency you know little or nothing about is like gambling, which can cause a serious disaster.
Avoid The Hype & Noise
While a growing population is embracing the financial prospect of cryptocurrency assets, naysayers are considering it as simply as over-hyped speculations. Both of these parties have a loud voice and tend to make a lot of noise.
To be a successful investor, it’s best to ignore such hype and invest based on calculated risk and get guidance from the right people.
Depending on only what a crowd is saying about particular crypto may lead to a terrible loss since the price can crash anytime.
Don’t Invest More Than You Can Lose
Investing in the crypto-sphere can put you in financial risk. While some people get nervous, others consider it as a potential opportunity and jump into it.
If you belong to the first group, you should not invest in crypto. However, if you’re willing to take the risk, it’s highly suggested that you only invest the amount you can afford to lose.
Sometimes, things can go south and you may face a massive financial loss if you put in all your money. That’s why it’s essential that you spend within your limit.
Don’t Invest in Just One Coin
“Don’t put all your eggs in one basket,” this common investment wisdom also prevails when it comes to investing in cryptocurrency. Since there are thousands of cryptos in the market, it’s wise to spread your investment across multiple coins.
Putting all your money on a single coin may cause serious problems since there are ups and downs going on. You may end up losing all your money if the value of a particular coin you invested in goes down.
Considering the risk, diversification of investment is essential to keep a healthy crypto portfolio.
Avoid The “Pump and Dump” Group
This is a common mistake that most novice crypto investors do. There are certain social media gurus or communities of traders who artificially inflate the price and entice the outside traders to buy the coins.
The concept is known as the “pump and dump” scheme and you must avoid such groups. You will not only suffer a huge loss but also get fined since this is illegal.
Use an Alternative Email
Most people use their personal email id while signing up for the crypto-sphere. This is highly prohibited since there’s a risk of a potential data breach, where your personal information may get leaked.
To avoid this problem, it’s highly recommended that you open a new email account just for trading that features a unique id and password, and two-factor authentication security. Make sure this security feature is utilized for each and every service that offers it.
Besides, do not provide any personal information while opening a new email id so that hackers can not find you.
Understand The Use of Hot & Cold Wallet
Since you’re investing in cryptocurrencies, it’s essential for you to understand the difference between cold and hot wallets. Hot wallets are connected to the internet while cold wallets work offline.
Based on your preference, you can store your cryptos in both wallets. However, it’s better to store them in the cold wallet since it’s more secured and difficult to hack.
On the other hand, hot wallets are easy to access and convenient for beginners. However, it’s also vulnerable to hacks.
So, if you want to store coins for a long time, it’s suggested that you keep them in the cold wallet and a small amount in the hot wallet.
While there are so many successful investors in the crypto world, there are also people who lost thousands of dollars hoping to make a quick buck. That’s why it’s crucial to get a solid idea before moving towards seriously investing in the crypto world.
We hope these tips will provide you necessary guidance for your safe investment in cryptos. These may not ensure you will be a millionaire overnight but can mitigate your risk of losing money.
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