Cryptocurrencies have become increasingly popular in the last few years. Its proponents are utterly convinced that it is going to drive the future economy. With news of bitcoin miners’ hefty incomes and lush lifestyles flying all over the place, the venture appears exciting and lucrative. However, before you start wading in the crypto waters, here are a few things to know.
- Do Your Research
In 2017 and early 2018, the number of cryptocurrencies in the market rose rapidly. Currently, there exist over1,600 currencies with different strengths and drawbacks. As a beginner, you will get a lot of advice about which platforms to invest in and which not to. However, we suggest that you do your own research to find out the currency that will suit your needs. Keep in mind that well-established platforms with high market cap (e.g. bitcoin and Ethereum) will offer you more security than newly established ones.
- Beware of Scams
A lot of scams have evolved in the cryptocurrency sector. The most common one comes in form of Initial Coin Offerings (ICO), where investors are sensitized to purchase tokens with a promise that when the currency grows so will their ‘shares’. Most of these platforms usually are scams and will go dark once they receive your ‘investment’.
A good way to steer clear of trouble is to involve commodity CFD brokers, who will help you evaluate viable investments and inform you of impending scams. Besides that, it is imperative to evaluate the product or tokens in terms of their market share, history, and online presence to minimize the risks of getting scammed.
- Invest Only What You Can Afford to Lose
The crypto industry is highly volatile – the value of a coin can shoot up as fast as it can drop. You could earn lots of money in a minute and lose it all in the next. Therefore, before you learn how to anticipate such a rapid rise and decline in coin price, it is important to invest an amount that won’t live a serious dent in your wallet if things go south. It’s recommended that you invest 10% of what is in your wallet.
- Set Up Your Wallet and Exchange Account
If you want to trade cryptocurrencies, you need to set up an exchange account. Large exchanges such as Bitmex, Binance, and Coinbase are good places to start. As a beginner, you might consider a brokerage account, which provides you with a buffer against the risky underlying market. Since there are close to no legal protections in the crypto world, you need a digital wallet to keep your proceeds safely. The wallet keeps public and private keys and communicates with blockchains to enable you to send and receive digital currency.
- Know the Terminology
It is quite difficult to operate in the cryptocurrency market without knowing the industry language. It is therefore important to research some commonly used terms such as altcoin, ATH, average down, going long, bag holder, and volatility among others. Some of these are strategies that will help you break even in the industry.
- Think Long-Term
The cryptocurrency venture has come a long way and is still developing. It is therefore bound to witness some serious ups and some pitfalls too. So the trick is to always plan for the long term. Avoid looking for massive one-time gains with unreasonably high stakes. Start small and patiently work your way up to succeed in the crypto market.
These are some of the things to know as you begin investing in cryptocurrency. To stay safe, invest within your budget, buy from trusted sellers only and avoid hype.