Today, cryptocurrencies are famous for being internet-native assets that can make anyone rich. Some have been able to build their wealth through careful work and an understanding of how these assets work, while others have simply been lucky enough to get in at the right time and watch their money grow.
Whatever it is, the allure of cryptocurrencies is evident for all to see. More people want to get into the market now, and it’s a gold rush. However, this doesn’t mean that you should throw all caution to the wind when it comes to crypto. You need to exercise patience and take cryptocurrency investment very carefully.
Below, we have 5 things every beginner crypto investor should consider doing before they fork out money to buy some coins:
Research, Research, Research
There is absolutely no way to can stress this enough. If you’re planning to enter the crypto market, you need to do your research. It has to be extensive, and you should be confident enough to make a move - or not make one - based on the research you make.
Today, there are over 15,000 cryptocurrencies available - that’s much more than the number of stocks available on exchanges today. Research will be the most important thing for you to know the right coin to invest in - and the right time to get in.
In 2021, we’ve seen a growth in the adoption of meme stocks like Dogecoin and Shiba Inu. These are great, but their rises are primarily driven by speculation and community efforts. Once the excitement wears off, their values tend to plummet - and at a much faster rate than the cryptocurrencies that have use cases.
Many coins are dead and gone at this point because they didn't get enough excitement and hype. Before you invest in any coin, be sure to do your research. Understand why the coin was created and see if there’s utility in it. This way, you’re sure that the decision you’re making is the right one.
Join Online Communities
Online communities are another important factor that can help you grow when it comes to crypto. These communities include people who are either looking to invest in cryptocurrencies or who already have skin in the game. You can share and receive knowledge, and you’ll find that the insights shared on these groups will be incredibly useful.
These groups will also help to keep you abreast of some of the biggest developments in the cryptosphere. To be fair, they might get irritating at times with all the noise and chatter - it’s normal when you get people coming together. However, when these groups get together, they mean business.
Create an Investment Strategy
The next thing you should do is to think about how cryptocurrencies fit into your general investment strategy and understand the percentage of your funds that will go to digital assets.
Today, cryptocurrencies are some of the riskiest assets you can put your money in. So, it makes sense that you don’t put all your money in there. You can allocate your funds into different investment options - bonds, mutual funds, stocks, etc. These assets are still profitable, and they’ll get you a nice return on your investment.
Also, you need to have a strategy to help you with the right time to buy. Dollar-cost averaging is a great way for you to go if you plan to invest in crypto for long.
Remember to never invest in assets that don’t have much value - or, only invest money you’re willing to lose.
Set an Emergency Fund
Again, remember that cryptocurrency prices are incredibly volatile. You want to put yourself in a position where you don’t have to sell at a low price when the market experiences a downturn. So, you must have something for emergencies.
With an emergency fund, you will be able to stay above water when the market is turning down, and you need money for something important. This way, you never have to dip into your crypto wallet to take money out.
Remember that the market swings a lot. You do;t want to buy high and sell low because that will be a very wrong strategy.
Pick the Right Exchange
Your choice of exchange is almost as important as the choice of a coin itself. There are several exchanges available today, all of which have their pros and cons. Since they’re not run the same way, you need to understand which will be better for you down the line.
Generally, you want to consider the following when it comes to crypto exchanges:
- Do they have a physical address you can reference?
- Are they allowed in your country or will you need a VPN to access them?
- Have they had issues in the past? If yes, how did they handle it?
- Does the exchange have the coin (or coins) you’re looking to buy?
- How secure is the exchange? What security options does it offer?
- What payment methods does the exchange offer?
- What are the exchange’s fees and deductions?
The right exchange will offer a mixture of safety, cost efficiency, and convenience. They should also have a reputable name with a proper track record of impressive service.