So, are you new to cryptocurrencies, and are you excited and ready to buy or invest in cryptocurrencies? Before investing in cryptocurrencies know about some important tips you should follow.
Today, in this article, we will share the top 5 things that you absolutely must do before investing in any type of cryptocurrency. So that you can get off to a good start, you can get a good night's sleep and manage your crypto assets like a BAWS.
Learn the basics of cryptocurrencies
The number one tip for all of them is to learn the basics of cryptocurrencies. Educating yourself about cryptocurrencies is the most important thing you can do to set yourself up for success. For generations, we are used to storing our wealth in banks, and it is someone else's responsibility to safeguard and protect our money. But with cryptocurrencies, that has completely changed. You are in control of your money. And if you lose access to your wallet or send your coins to a dead end or the wrong person, there is no Help Desk or Support Center you can call to try to reverse a transaction. That doesn't exist with cryptocurrencies. You must take security very seriously from the beginning and understand how these systems work.
For many of the cryptocurrency projects like Bitcoin and Ethereum, there is no company. There is no CEO. There are no actions. Instead, these are decentralized, peer-to-peer systems that operate much less like a business and much more like the Internet, where no person or entity owns or controls it.
Do your research
Tip # 2, which is to trust no one and do your research. Like the Internet in the 90s, today's cryptocurrencies aren't just rays of sunshine and rainbows. There are many Pump and Dump schemes; scammers will try to scam you for your money if you are not careful (even on platforms like Twitter); it is a bit crazy. "accomplices" out there are promoting these projects that they don't believe in; they are just trying to make you the dumbest. So you can't trust anyone, not even me. And if someone is trying to tell you that "This is the next most popular currency to invest in," you should think about what their motives are and why they would say that. If it's someone on the Internet saying this, there is probably something up there. But if it is a friend or family member, then there is less chance that they are trying to trick you into doing something. However, that doesn't necessarily mean it's good advice. You need to do your research and not take anyone else's word for it.
Invest what you can afford to lose
So tip n. # 3 is investing only what you can afford to lose. I literally mean every dollar you invest in cryptocurrencies, with the understanding that everything could go to zero overnight. Because at the end of the day, cryptocurrencies are programs. It is software. And software is built using code, which comes from humans. And we are not perfect, and the code is buggy. And it is possible that a mistake is discovered that leads to a "black swan" event that could wipe out your entire investment overnight. And errors aside, there is a 51% network attack risk or fear of quantum computing. There are user errors, such as putting your coins on an exchange, and that exchange is hacked, and the funds are stolen. Or if you accidentally send your coins to an invalid address. The list goes on and on. Cryptocurrency has only been around as an industry for about ten years, so we're all learning as we go how to do it. It's very much an experiment; it's in its infancy, so make sure you treat it as such and only invest what you can afford to lose.
Make a plan and stick to it.
The advice n. # 4 is having a plan and sticking to it. Let's say you buy Bitcoin at USD 3,500 today, but then it sinks to $ 2,500 tomorrow, and then $ 1,000 the next day. What is your plan? Are you going to keep it? Are you going to sell it and cut your losses? Are you going to buy more? Could you imagine the panic you would feel if you didn't think about this ahead of time? Even on the other side, let's say you buy at $ 3,500 today, but then go up to $ 4,000, and then $ 5,000 the next day. What is your plan then? Are you going to make a profit? Are you going to stay in the market? You have to think about these things. So some of the critical things to think about here are:
- What is your strategy to enter the market? Are you going to put a lump sum at a specific price? Let's say Bitcoin goes to $ 3,300; that's my kid's price. Or are you going to take the other approach called "Dollar Cost Averaging," where instead of making a lump sum investment, what to do if you take your budget and cut it into pieces, and over time, already be it weeks, months, or even years, slowly apply that budget to the market? Instead of buying at a specific price and being a bit stuck, you are purchasing all prices regardless of market performance.
- Number 2 is to decide, is this a short term investment, or is it a longer-term investment? Let's say 3-5 years. And that is what I recommend because the crypto markets are extremely volatile in the short term. If you bought Bitcoin today at $ 3,500 US dollars, what if you suffered a 6-month recession the day after buying it? And honestly, everyone feels like that's the case when they first get involved in crypto. It feels like the right of way. If you have a long enough time horizon for this investment of 3 to 5 years, you can probably escape that volatility in the short term. If you are trending up and to the right, hopefully, your investment's future value is much higher than the initial investment you would be making today. Now, if this is a short-term investment for you, then in sub-tip number 3 here, you will want to set your stop loss and limit orders on whatever cryptocurrency exchange or mobile app you are using. Make exchanges. Because again, if you were to buy at $ 3,500 today, you need to know that if it drops to $ 3,000 tomorrow, that could be the price at which you want to get your money out and preserve your capital. And to reduce your losses.
And on the other hand, if it goes up to $ 4,500, maybe that will meet the set's goal. That could be the profit margin you are looking for. You have to know these things beforehand. Set your orders, and believe me, by doing this, by having a plan and following it, you will be able to sleep much better at night. You won't be glued to your phone all day reviewing charts and prices, and you can conserve much more of your precious brain juice.
Get a hardware wallet.
And finally, tip n. 5 is to get a hardware wallet. You see, to own cryptocurrencies, you have to store your coins in what is called a digital wallet. And these wallets come in many shapes and sizes. There is Coinbase, for example, a service that will host the wallet for you. There are applications that you can download and run yourself on a desktop or laptop. And then there are these physical ones, which look like USB sticks. These are hardware wallets. And they are designed for the sole purpose of safeguarding and protecting your crypto assets. And my general recommendation is that if you own, or intend to hold, around $ 1,000 or more in cryptocurrencies, it makes sense to invest in a hardware wallet like Trezor, Ledger Nano X, or aKeepKey. And most of these hardware wallets can be purchased for around $ 100 or less, so it makes sense, and it's not going to break the bank.
These are some essential things you should know before investing in cryptocurrency. These are precautions you must use before buying cryptocurrency. I hope this will help you.