Cryptocurrencies are becoming more popular by the day. These digital or virtual tokens use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized. Therefore, the government or financial institutions have no control over them. However, when you hear of cryptocurrency, it is not only about bitcoin.
So, what can you do with cryptocurrencies? Well, you can use them to purchase goods and services. Additionally, you can trade them on exchanges for other cryptocurrencies or traditional currencies like the US dollar.
Investing in Cryptocurrency
One of the basic rules of investing is to know what you own, and it is no different when investing in cryptocurrency. Know how each cryptocurrency works, who created it, why was it created, what does it do, and what are its features.
Cryptocurrencies run on blockchain technology, which is a public ledger of all transactions of a particular currency. All the activities of a cryptocurrency are recorded forever in this public ledger. Therefore, they can never be changed or deleted, making them more secure than other transaction records.
These digital currencies work just like paper currencies. You can have a record of transactions in cryptocurrencies just the same way you have a record of transactions in traditional currencies as seen in bank statements or checkbooks.
Cryptocurrencies are more secure than paper currencies because they are not housed in banks. Instead, dealers record them on a decentralized blockchain that is not susceptible to hacking or interference from authorities. They are digital assets that are sent through public networks without too much fear of theft or fraud.
If you want to invest in cryptocurrency, here is a 10-point guide on how to get started –
1. Do your research
Like any other investment, it is important to do your research before investing in cryptocurrency. Learn about the different types of cryptocurrencies available. Know what affects the value of a particular currency, and how to trade it. You may need to get advice from cryptocurrency experts and analysts if you do not understand how cryptocurrencies work.
Do your homework before buying into any cryptocurrency. What is the coin’s purpose? What is the team behind it and What is the coin’s roadmap? These and a few more questions will get you going in the right direction.
2. Set your investment goals
Before you invest in any cryptocurrency, you need to set your investment goals. What do you hope to achieve by investing in cryptocurrency? Do you want to make a quick profit or are you looking to hold on to your coins for the long run? Once you know what your goals are, it will be easy to pick the right investment.
3. See if you have what it takes to be a cryptocurrency investor
Cryptocurrencies are not for everyone. They are extremely volatile and speculative investments, with the potential opportunity for some big gains as well as losses.
A good way to know if cryptocurrencies are right for you is to ask yourself how comfortable you are with taking risks. It is not a wise idea to put all your savings into cryptocurrencies, no matter how bullish you may be on the market. Start small and invest what you can afford to lose.
4. Choose the right cryptocurrency exchange
Not all cryptocurrency exchanges are created equal. Some exchanges offer a wider variety of cryptocurrencies while others focus on a specific currency. It is important to do your research and find an exchange that meets your needs.
5. Secure your cryptocurrency wallets
Just like you would secure your physical wallet, you need to take measures to protect your cryptocurrency wallets. This includes creating strong passwords and using two-factor authentication.
6. Don’t invest more than you can afford to lose
As with any investment, it is important not to invest more than you can afford to lose. Cryptocurrencies are volatile and the prices can go up and down. Therefore, start small to reduce the risk of losing your initial investment.
Use limit orders to help protect you from market volatility and execute trades at unfavorable prices. A limit order allows you to set a price for which you want to buy or sell an asset in the future, or on a specified date. Using limit orders may help you to reduce your losses by allowing you to take advantage of a price swing without having to wait for it to occur before acting.
7. Keep your private keys secure
Do not share or lose your private keys with anyone, under any circumstance. When setting up wallets, be sure that you retain the recovery phrase. This is important for keeping your cryptocurrency investment safe and secure.
8. Beware of scams
Since there has been explosive growth in cryptocurrencies, it comes as no surprise that many scammers are trying to take advantage of unsuspecting investors. Stay vigilant when looking for investment opportunities because people disguise them as fraudulent schemes.
Do not fall for Ponzi schemes or multi-level marketing (MLM) offers. If you are investing in Bitcoin, it will be hard to get 100 percent returns on investment (ROI). However, this does not mean that Bitcoin is a Ponzi scheme or MLM project. You need to do your research to spot these scams.
9. Manage your cryptocurrency portfolio
It is advisable to keep your cryptocurrency portfolio roughly balanced. Stick to the golden rule of never risking everything in one endeavor. This will help you manage risk more effectively.
10. Use a hardware wallet for extra security
Hardware wallets, such as the Ledger Nano S or the Trezor, are physical devices that store your private keys offline. This makes them immune to malware and hackers. If you are serious about investing in cryptocurrencies, then using a hardware wallet is essential.
Cryptocurrencies are a new investment opportunity, and while there is always risk involved, they may be worth considering. If you want to get started, do your due diligence and follow these tips. Moreover, never invest more than you can afford to lose.