Cryptocurrencies are still one of the major topics today. Ever since Bitcoin introduced the concept of cryptocurrencies, as well as the blockchain technology behind them, people have been more than interested in this digital money.
Today, cryptos are one of the main investment opportunities for tech-savvier investors. However, investing in crypto is more than just buying and selling coins. The crypto market itself differs from any other investment type you may be familiar with, such as stocks, bonds, real estate and so on. The fact of the matter is that investing in cryptos requires a more delicate and unique approach.
A good example is that some people were fortunate enough to make millions overnight while others were unfortunate and lost the same amount at the same time. That’s why it’s important to know how to navigate the market and how to handle the volatility as well. With that in mind, here are a few things you should know before investing in crypto.
Do some research first
Researching the cryptocurrency market, as well as educating yourself is crucial before you start investing. This is especially true if you’re a beginner crypto investor. The main reason is that you must familiarize yourself with various cryptos on the market, as well as both the companies and the blockchain technology behind those cryptos.
Bitcoin and its decentralized public ledger may be the most valuable but they’re not the only investment option available to you. What’s more, you must familiarize yourself with the terminology and the meaning behind it. For instance, here are a few terms you should research well.
- Circulating vs. Total supply (i.e. the number of coins on the market vs. the amount left to be mined (17 million Bitcoins on the market vs. 4 million left to be mined)).
- Exchanges.
- Wallets.
- Public keys.
- Private keys.
Understand mining cryptos
Mining is an investment aspect unique to cryptocurrencies. As mentioned before, buying and selling coins is not the only thing you can do with cryptos. The fact of the matter is that you can acquire coins by mining them instead of just buying them. This is a good initial strategy before you start working with your assets on the market. You can mine any crypto you want but since Bitcoin is the most valuable prize, you might want to start there.
What it means is that you basically borrow your computer hardware to the blockchain to help it verify and record transactions. You will need an effective Bitcoin mining rig to do so and make the entire mining process more seamless. The reward for solving the block problem is 12.5 Bitcoins. Mining is, therefore, one of the efficient ways to get your hands on cryptos so you can proceed further with your investment strategy.
Don’t forget about volatility
The cryptocurrency market is unregulated and highly volatile. That’s not necessarily a bad thing, it only means that you have to be careful with the margins and take extra heed with your strategies. Since the market isn’t as stable as it can be, you’ll need to adopt a specific approach when dealing in cryptos, that’s all. In other words, you can’t predict outcomes based on statistics alone as you’d with stocks or foreign exchange (Forex).
That’s why you must carefully calculate your every step when investing in cryptos. For instance, never invest more than you can afford to lose. If you invest everything you have, including your life savings, you may easily end up bankrupt. On the other hand, not making a decision because you worry that you’ll make a mistake is also bad. An opportunity will present itself sooner or later and if you don’t take action, you might end up regretting it.
Always check the utility
Every crypto has a unique offer behind it or a utility if you prefer to call it that. The only way an ICO (Initial Coin Offering) can succeed is when it will bring something useful to the ecosystem. In other words, coins or tokens are digital means for investors to invest in a company.
Before you start investing, you’ll have to familiarize yourself with what that crypto will bring to the table. Therefore, you must read the company’s white paper thoroughly. That might not be the most interesting thing to do but it’s very important. It will not only help you familiarize yourself with the company and their ICO but it will also help you spot a potential scam.
Investing in cryptocurrency can be a lucrative endeavor. However, you must first educate yourself about the market itself, as well as the technology behind cryptos before you proceed with the investments. That way, you can make sure that you’re making the informed and the right decision.