The cryptocurrency market is extremely volatile but still lucrative at the same time. At the rate in which fortunes have been made and loss on the crypto market, one could be forgiven for mistaking crypto investment with gambling.
However, the truth is that investing in the crypto market calls for a remarkable amount of foresight. Digital assets such as Bitcoin and other cryptocurrencies were initially written off by investors as they lacked any tangible presence.
Given the explosion in popularity enjoyed by cryptos nowadays, it would appear that the naysayers were wrong. While cryptos are indeed an intangible asset, they more than make up for it with their utility.
Cryptocurrencies are able to facilitate global transactions with ease thanks to their unregulated nature. Additionally, the ability to instantly transfer funds between two points make them an invaluable asset in today’s world.
From leveraging on price differentials to using crypto as a store of value, investors have begun to appreciate the versatility of crypto as an investment.
Given Bitcoin’s increasingly strong performance, you too may be tempted to begin investing in cryptos. However before getting started, here are some of the bare essentials that you’ll need to know.
1. Investing in the crypto market requires commitment
Unlike stocks or financial instruments, crypto assets are extremely volatile and oftentimes appreciate or depreciate with little-to-no warning. Thus when building up your crypto portfolio you would do well to constantly monitor fast-changing market conditions.
Failing to do so can cause you to suffer massive losses or miss out on potential opportunities.
Regularly keeping an eye on your investments will also help you build up an understanding of the crypto market – an essential skill to have if you are looking to invest on the long-term.
You should also research about crypto wallets and how important they are to keep your assets safe. Click here for an article on cryptocurrency wallets explained.
2. Information is power
With cryptocurrency becoming an increasingly popular asset, institutional investors too have begun taking notice. These investors are known as whales who have the power to significantly affect market sentiment.
Because institutional investors are affected by external factors such as economic sentiment or government policy, cryptocurrency is no longer as insulated as it once was.
This is why you would do well to keep an eye on current events that may affect investor behavior.
For example, in the wake of rising uncertainty caused by the upcoming U.S Presidential Election, institutional investors may turn to cryptocurrency as a means of hedging against a weakening USD – thus driving up the price of Bitcoin and other cryptos.
3. Work with reputable parties
Whilst the unregulated nature of cryptocurrency has been lauded by many, all this freedom comes at a cost.
With hundreds of crypto exchanges and banks on the market, scams and theft are extremely common. Working with the wrong exchange can lead to potentially hundreds of thousands of dollars in losses.
This is why conducting the appropriate due diligence is extremely important when investing in crypto. Only work with credible exchanges with a proven track record and avoid deals that sound too good to be true.
4. Avoid emotional investments
Investing is all about objectivity and making the best decision with the information available to you. This is why you should always keep a cool head when investing in cryptocurrencies.
The volatile nature of the market means that it’s all too easy to make the wrong decision in the heat of the moment for fear of losing out.
Before taking a leap of faith, step back and take stock of the situation. Gather as much information as possible and make an educated decision. Following the crowd will more often than not lead to you making the wrong choice with your investments.
When stepping into the world of cryptocurrency, you’ll need to have your wits about you at all times. By protecting yourself and staying educated, you’ll be positioned to make the best possible choice at any time.
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