Cryptocurrency is getting popular with time and many investors are investing in it. Unknown to many a few years ago, cryptocurrency is on fire, and everyone is looking for profit on its white-hot rise.
Launched in 2009 with the introduction of Bitcoin (BTC), cryptocurrency has come a long way. Bitcoin has become the world’s largest cryptocurrency by market capitalization, thanks to its positive adoption and profitability.
The crypto business has attracted many investors across the globe. Everyone wants to hold on to an asset that they cannot use as a tool of investment, but as a currency to buy commodities too.
But cryptocurrency is relatively new to fiat or traditional currency and investors need to be careful when buying it. There are multiple things you should plan as they will help you avoid losses in the crypto market that is already volatile.
Let us find out some important things that you should do before start investing in cryptocurrency.
As you would do for any investment, understanding exactly what you are investing in helps you make the right decision. If you are putting money in stocks or buying a house, you would do planning before doing anything.
You need to do the same with cryptocurrency.
Cryptocurrencies can be defined as digital or virtual currencies that exist on blockchain technology. They are a peer-to-peer payment method system supported by computers and algorithms.
You can make a crypto transaction at any time anywhere across the globe, thanks to the 24/7 availability of cryptocurrencies. In addition, cryptocurrencies are unregulated currencies and no third party like a bank or a government can interfere with your crypto wealth.
Blockchain technology is protected by cryptography which consists of complex mathematical problems that are hard to break. This makes it difficult for fraudsters to perform any scam.
Bitcoin is the largest cryptocurrency and dominating the crypto market for years. However, cryptocurrency is not just restricted to Bitcoin (BTC), as you can also purchase thousands of other digital coins.
You should remember that cryptocurrency has a limited supply to ensure an inflation hedge. Every digital currency is created with the intention of giving its user more purchasing power.
Many global leaders have come forward in the support of cryptocurrency and labelled it as the best alternative to fiat or traditional currency. One such global leader is Carl Runefelt, alias, The Moon, who has invested in more than 350 crypto startups.
He says, “My biggest tip to anyone out there is to get into Bitcoin at any price you can. You literally cannot afford not to hold Bitcoin. It is in my opinion the most interesting and revolutionary asset we’ve seen in maybe thousands of years and these opportunities they don’t come around very often. We’re talking about like once in maybe a thousand years, maybe once in human civilization. So, having just a little bit of Bitcoin in your portfolio that’s the reasonable way to do it.”
Know the Risk of Buying Cryptocurrency
No investment is free from risks, and this is something important you should be careful about when investing.
Cryptocurrency can be a particularly risky investment because of its nature. Make sure that everything else is taken care of before investing in cryptocurrencies because failing to meet your financial responsibilities might be extremely difficult.
Contrarily, fiat is governed and subject to a number of checks and balances. But because cryptocurrencies are decentralised and not controlled by any bank or other financial organisation, their
Price fluctuations are a normal phenomenon in the crypto business. You can see a cryptocurrency skyrocketing one day, and the next day, it becomes cheap.
For instance, the value of Bitcoin was over $70,000 last year and is currently $16,019 (as of November 2022).
But this does not mean that you are putting your money at the risk of losing. All you need to do is stay calm when the crypto market is bearish and make wise decisions that can help you avoid making unwanted losses.
Deal with Volatility
One word that you might have heard a lot about cryptocurrency would be volatility.
Cryptocurrency is a volatile asset, and its price can fluctuate quickly. If you observe the crypto market at present, you can see all currencies are losing value and some have even collapsed.
For new investors, crypto volatility can be scary, and they might end up making the wrong moves. But there are successful crypto investors too who face the same kind of challenges faced by the rest.
Then what do they do to make the right type of investment?
Carl, on his YouTube channel, The Moon, emphasizes, “Bitcoin is a game of patience. You cannot look at the daily chart and put too much significance on it. Holding long-term will make you money in Bitcoin and crypto in general. If you look at the day-to-day or minute-to-minute, it can look very volatile; you see 50 jumps and then 60 dumps. People get fearful and panic, but always remember if you zoom out on the Bitcoin, you will always see a bull trend on Bitcoin.”
Cryptocurrencies are volatile because they are unregulated currencies. A successful crypto investor always plans his investment carefully and waits for the right moment.
Instead of selling your digital coins when you see cryptocurrency dropping prices, you can trade them wisely. You can buy those coins that are now affordable and hold on to a large part of your investment because cryptocurrency has bounced back strongly in the past when a crypto dip is over.
Invest What You Can Afford
When you are looking to make an investment, you prefer investing a handsome amount or buying a larger chunk. But due to the risks involved in the crypto business, experts advise you should invest in a cryptocurrency that you can easily afford to lose.
You should plan your crypto investment and never put all your savings into it. If you are investing all you have saved throughout your life in cryptocurrency, you might regret this decision at some point.
An investment that you can easily afford to lose should be your target with cryptocurrency. Never let yourself lure by talks glorifying a crypto investment but focus on the recent market trends to understand crypto volatility.
Successful crypto investors also diversify their crypto portfolios by investing in multiple cryptocurrencies. It is a known fact that Bitcoin is a leading cryptocurrency but there are over 10,000 cryptocurrencies available to each investor.
Instead of putting your money in a single coin, you should buy multiple digital currencies. In this way, you can easily trade cryptocurrencies whenever you want to.
Cryptocurrencies present a remarkable opportunity for investment that is worth exploring. Today, investors are preferring cryptocurrencies over fiat because of their multiple benefits and versatility.
But a successful crypto investment includes a comprehensive understanding of the crypto market and the right planning.
You can follow the above-mentioned tips to make the right type of investment in the cryptocurrency of your choice and make handsome profits with it.