With so much news
about cryptocurrencies, from the rise of Dogecoin to the gains of Bitcoin, many newcomers want
to participate in this market. While investing in crypto can be very
financially rewarding, there are a few things a new investor should be aware of
before "jumping in."
An increasing number
of people are investing blindly, assuming it's easy after seeing success
stories or hearing a friend or family member experience a huge profit. If it
really were easy, everyone would be a "crypto-millionaire."
If you are considering
investing in cryptocurrency, here are five things to consider beforehand. The
last thing you want to do is walk in blindly and unprepared. Do not believe
everything you see on social networks: investing in cryptocurrencies is not
easy.
1. Never invest more than you can
afford to lose
I like to tell people
to research fully aware that you could lose it all and to only invest an amount
that you are 100% comfortable with losing. Most people will not come out on top
after their first few trades.
Sure, there will
always be beginners' luck in some circumstances, but the market is very
turbulent and there are many things to consider, many of which are learned
while trading live. You can study charts and trends, but nothing compares to
what happens when you have real money on the line.
Think of your initial
investment like tuition. It is an investment to learn how to invest in
cryptocurrencies by trading with real money. If you miss it, write it down as
an expensive lesson. The last thing you want to do, however, is invest money
that you can't afford to lose because there's a chance that could happen.
2. Do your own research
There is no shortage
of self-proclaimed cryptocurrency experts and financial gurus online who claim
to have the secret formula for success. They want to sell you access to private
Discord servers, Telegram chats and WhatsApp groups.
Never trust another
person when it comes to investing your money, especially someone who is not a
licensed financial advisor. These characters make money selling information,
and once they have you, they can't give a damn if you succeed or fail.
Always do your own
research and due diligence before investing, especially if it is a new coin. I
suggest you watch some YouTube video tutorials on the subject. When you see how
easy it is, you will be much more diligent in researching possible
cryptocurrency investments.
3. Use common sense: if it sounds
too good to be true, it just might be.
If someone promises
you 100x profit on a new coin, be very careful. Sure, there are some cases
where early adopters break into a new currency and its value skyrockets,
bringing mind-blowing returns.
But, for every such
case, there are thousands of investors who lose everything on a single bet,
hoping to experience one of those legendary returns. Also, if you see good
returns on a coin, take out your initial investment and put it aside.
This is what
well-disciplined investors do. They are not afraid of limiting their potential
return by doing this. Not every coin will be a winner, so this strategy allows
them to reinvest in something else if the coin takes a dip.
4. Never act based on FOMO
Most of the new
cryptocurrencies are launched with a lot of enthusiasm. From aggressive PR
campaigns to celebrity endorsements, this can cause many investors to blindly
jump in without thinking because they fall victim to FOMO, or Fear Of Missing
Out.
This can come back to
bite you severely in the butt and cause you to make irresponsible decisions. A
lot of PR is bought and not organic or fact checked. Celebrity endorsements and
partnerships are also purchased, usually in the form of tokens, giving the individual
an incentive to promote the coin.
5. Protect your keys
Lastly, and most importantly, you must protect your passphrase or private key. This is the only way to access your cryptocurrency, and if you lose your keys, there is no way to access them. Equally important is the fact that anyone can access and steal your crypto if they get hold of your passphrase.