Cryptocurrency has made many millionaires but also erased their savings. There are some essential tips that you should know before you dive into the crypto world. Otherwise, you could end up in a financial mess and a lot of disappointment. Some of these tips are applicable to many fields, while others are specific to the crypto niche.
Spend Time Engaging With The Crypto World
It should be obvious, but many people invest in cryptocurrency without doing enough research. Do not just invest in currencies that are popular. Take the time to research how each cryptocurrency is different and what it offers. This will help you to determine which projects are legitimate and which are false hype.
Second, if your crypto knowledge is not up to date, you might find it difficult to understand the discussions. Newcomers may find it difficult to understand the lingo and peculiar terms that are specific to the cryptocurrency industry. The number of terms is also growing due to the development of new technologies.
The crypto-world is more than Bitcoin, Litecoin and Tether. You can keep track of new opportunities by being active in crypto communities like r/Cryptocurrency, on Reddit. Also, you can follow famous crypto voices on Twitter. You can also find out about new opportunities, get opinions on a particular project, and learn from other people’s methods.
Don’t take “doing your homework” too literally. Even those with a computer science background may find some aspects of blockchain too complex to understand. Don’t be hard on yourself.
Expect High Risk
Cryptocurrency has one of the most volatile market: Prices change rapidly and dramatically. You have to mentally prepare yourself for the rollercoaster that is investing in cryptocurrency. The value of your coins can rise and fall overnight. Most people are unaware of the mental toll that this has on them. Always expect high risks and stay calm during a storm.
White Papers are more reliable than word of mouth
Some people have a hard time forming an opinion when it comes to researching new projects to make an investment. Media can be very divisive, with many conflicting opinions. The same is true for people. You must learn to trust your own judgment if you are to become a successful investor.
White papers are the best, most impartial source of information. The white paper will give you an idea of what the developers are planning to do with this cryptocurrency, as well as a general overview and some specific information. The white paper should be transparent, sophisticated and make sense to you.
You should avoid it, even if you are attracted by the hype, if the document is vague, lazily written, or suspicious. You’d be shocked at how many scams are out there in the crypto- and DeFi space.
Start Small
Do not think of cryptocurrency as a lottery ticket to instant success. Consider it a journey filled with mistakes and lessons.
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Start small and gradually increase your stakes as you gain confidence. Start small and then gradually increase the stakes as you gain confidence.
In the US, crypto does not have the same protection regulations as the stock market. For example, Securities Investor Protection Corporation or Federal Deposit Insurance Corporation. Once the cryptocurrency is gone, it is impossible to get compensated.
Remember Transaction Fees and Taxes
Although they may seem small, transaction costs can add up quickly, especially when you consider that many crypto investors make multiple transactions a day simply because they notice the price change.
You will be subject to capital gain tax if you reside in the US, Canada or Mexico. The rate for short-term gain is 10-37%, and the rate for long-term gain is 0-20%. Tax rates can be affected by factors such as income, holding period and marriage status. So, remember to include taxes in your calculations.
Invest in Multiple Coins
Most investment forms include this tip, which is “don’t place all your eggs into one basket”. When you diversify your investments, you have a backup asset to fall back on if one investment goes wrong.
In a market as speculative as cryptocurrency, you should always invest in established coins like Bitcoin, Ethereum Binance, Tether… but don’t forget about the more obscure, newer currencies. Every big currency began as an unknown, new one. These smaller coins can also grow at an incredible rate, making them a great way to make quick profits.
Set a Profit Target
Knowing when to sell is one of the most difficult things to master in cryptocurrency investing. You’re likely aware that the crypto market can be as volatile as any other. You may feel a strong urge to sell when the price soars, for fear that it will plummet tomorrow. But a part of your mind wonders if the price could go higher. The dilemma is now upon us.
Set a target for profit or loss to help you make logical decisions about selling. If the price continues to rise, you will have what you wanted. You’ll save money if the price falls.
Consider automating purchases
Most cryptocurrency exchanges allow you to create automatic purchases. The exchange, for example, can purchase $100 of ETH every month. This is a good method for people who want to invest in many coins but don’t have time to worry about timing the market.
If you are able to predict the market correctly, you will be able to buy at the best price and make the most profit. It is difficult to time the market correctly, especially with the unpredictable nature of the currency markets.
The Bottom Line
Jack Spade has written a guest post. Jack Spade, a crypto enthusiast and lover of sharing knowledge with others. He’s also an aspiring novelist with a medium account, where he shares all sorts of interesting stuff.
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