Everything about crypto has become a news story: from wild price fluctuations to the flurry of initial coin offerings (ICOs) and the seemingly insatiable demand for mining GPUs. As the market grows, cryptocurrencies continue to take over the mainstream, and many seasoned investors view them as a must-have asset for a diverse portfolio.
Investing in cryptocurrency as a beginner
With the increasing inflation and the instability of fiat currencies fueled by economic sanctions, crypto has been thrust into the mainstream market as a viable solution to maintain wealth and trade assets across borders.
However, investing in crypto as a beginner is no less than sailing uncharted waters. Even seasoned investors can stumble across a bottleneck, not to mention newbies. And without proper research, new investors are more likely to fall for scams and lose all their investment capital by supporting currencies with little to no track record or market cap.
You can get your foot in the door via crypto-to-fiat pair trading as it offers a lower level of risk than crypto-to-crypto pair. You can leverage the volatility of the crypto market to your advantage by investing in crypto-fiat pairs, as it offers massive potential for speculative trading. For starters, you should choose a digital coin with a significant market cap and a fiat currency with substantial financial and economic influence, such as the BTC to GBP or Eth to USD pairs.
Four things you should know before investing.
Even though crypto offers many benefits, success with crypto trading comes with many associated risks invisible to an untrained eye. Despite the apparent risks, one thing is clear: crypto is here to stay. Everyone seems to want a piece of the crypto pie, from corporate giants to government organizations to A-list celebrities and your average Joe. So, before you get trading, here’s everything you need to know:
1. Understand the market before investing
Before making any investments, prospective investors should familiarize themselves with the workings of the crypto market – especially if they are new to it. It’s essential to take your time learning about popular currencies and their differences. Understand the underlying workings of crypto and don’t take everything at face value.
A comprehensive understanding of how the blockchain network works in crypto can help you make better and more informed investment decisions. Learn about newer currencies and their potential, and don’t just stick to popular coins like Bitcoin and Ethereum. To transfer funds in and out of the cryptocurrency market, you should look into reliable platforms that allow the deposit and withdrawal of fiat currency.
Familiarity with the fundamentals of buying and selling can help you quickly get your task done when the time is ripe. The ability to convert cryptocurrency gains into local currency is critical to maximizing profits as mainstream acceptance of digital currencies is still in its infancy.
2. Diversify your portfolio
One of the biggest challenges in crypto is avoiding falling into the hype or getting caught up with trending strategies, as they are nothing but traps meant to lure inexperienced investors into scams. Furthermore, a tribalistic mindset exists among ardent crypto followers who think going all-in on one digital asset such as Bitcoin or Ether can guarantee massive success. However, half-cent digital currencies can experience explosive growth by reaching a value of hundreds if not thousands of dollars – that rarely happens as most crypto projects offer modest profits or burst into flames at the first sign of market volatility.
The safest bet when investing in crypto is diversifying your portfolio. Investing in various projects and coins instead of sticking to one can help you benefit from the general growth of the crypto industry. Furthermore, projects such as NFTs and layer-one protocols with an upward market trend can significantly diversify your portfolio, preserve your capital, and increase your exposure to various digital assets over the long run.
3. Your research matters
Before you invest your capital into the crypto market, do your homework to fully understand a project’s long-term viability and see if the project is sustainable in the long run. Furthermore, never invest in anything by blindly following a recommendation (whether from someone you know or something you came across on the internet), especially if the investment seems risk-free with a guaranteed return. When you hear such claims, it’s time to back off, as crypto investments are riddled with risk, and the concept of “risk-free investments” simply does not exist in a volatile market.
Additionally, only invest what you are willing to lose. Due to the inherent volatility associated with cryptocurrency, most digital coins will ultimately lose their value. As a result, you should never put more money into an investment than you can afford to lose.
Do your research, understand your gains and losses, and thoroughly review your strategy before investing even a fraction of your wealth into crypto. You should only invest in crypto with money left over after meeting all your monthly expenses and putting away a little amount for emergencies. There is no assurance that your investment into a digital asset will hold as a long-term investment, and even if it does, it might take years to recover your losses in a bear market situation.
4. Catch the perfect timing
Once you’ve understood the crypto market and selected a few potential projects to invest in, it’s time to work out the right timing to invest your money. The crypto marketplace is fast-paced and dynamic with a volatile nature, so a good investment opportunity doesn’t wait around and won’t come twice. Because of this, even the most well-intentioned investors in the cryptocurrency market make investments that end up losing money because of bad timing. Furthermore, many naive traders can’t resist the Fear of Missing Out, get enticed by project potential, and end up investing during a bad time – losing what little wealth they had.
If you desperately want to own a crypto asset, resist the urge to buy it now and wait for the optimal time when prices drop and consolidate. Otherwise, look for a quality project with a flat trading record with genuine potential, and invest and gain profits when the time is perfect.
Understanding what you’re getting into and its risks are critical before hopping on a crypto exchange. Adopting a careful approach to crypto is key to maximizing your chances of long-term success – after all, prevention is better than cure. You can make smarter investments by understanding the ups and downs of the crypto market and the underlying blockchain technology. Keep these four recommendations in mind before making your first investment to minimize the risk of failure.