Investing in Cryptocurrency: Things to Do Before You Get Started
Cryptocurrency is one of the biggest topics in the world of investing these days as many people are investing heavily in various cryptocurrencies. The craze for crypto started a few years ago when a number of people made massive profits from investing in bitcoin and in the years that followed, many have tried to replicate this success. As a result, it is estimated that there are over 2,000 cryptocurrencies in existence with more being created every year. Before you rush to invest your life savings in crypto, as some have done, take the following precautions:
1. Understand cryptocurrency: Cryptocurrency might be the hot new thing at the moment, but it would be a very bad idea to invest in it without fully understanding it. If you are unable to even define cryptocurrency and don’t know how they work, it would be reckless to invest any money in it. Many fraudulent individuals have taken advantage of people’s lack of knowledge and have peddled fraudulent tokens in order to swindle new investors out of their money. Just like with any other investment, take some time to conduct research before you invest your money. Because cryptocurrency exists in the virtual world, there is a wealth of books, podcasts, videos, and articles that explain everything from the basics to the more complex aspects of cryptocurrency.
2. Invest in legitimate tokens: As previously mentioned, there are over 2,000 cryptocurrencies in existence and these range from the major ones such as bitcoin and ether as well as the rather obscure ones. As a first-time crypto investor, you might find yourself at a loss for which to invest in, especially since there are so many fraudulent tokens as well as ‘pump and dump’ schemes on the market. This boils down to research about whatever tokens that you wish to invest in, including its history, origin, price history and price predictions. If you wish to stay on the safe side, only invest in very well-known tokens as they will have more publicly-available information.
3. Invest a reasonable amount: This rule applies to every type of investment but is particularly important when entering the cryptocurrency market. This is because cryptocurrency has been touted by many as a means to get rich overnight, mostly due to some of the earliest investors in certain cryptos who made a lot of money. Also, the cryptocurrency market has very few entry barriers as it is mostly decentralized which has led to a large number of people making investments. Some of these people have invested their life savings and have gone into debt trying to invest, mostly to disastrous results. To avoid this, follow the classic law of only investing money that you are willing to lose should things so south. It should also be noted that the cryptocurrency market tends to be very volatile and as such, invest only a little and them increase investments as you understand market patterns better.
Before you rush into the wild west of cryptocurrency, take some of the above precautions to avoid financial disaster.