The world of cryptocurrencies is as exhilarating as it can be confusing. It seems like a new altcoin is being introduced every day, all with their own share of promises and expectations.
While some people might be deterred by all this noise and confusion, others might want to jump in the market and try their hand. But while cryptocurrencies are promising, jumping in the crypto market head first is a sure recipe for disaster. Here are a few things everybody should know about cryptos before they invest.
Research, Research, Research!
Just like any market or financial asset, it’s important that you do your research before you even think of investing. Before you think of buying a crypto, you have to know things like its current market cap, its use case, potential level of adoption, proof of concept and more.
All of this will usually be featured in the currency’s white paper. After you’ve weighed all these factors in, you can think about making a move. However, make sure to start small and stay up to date since crypto markets can be extremely volatile.
You should also make sure that you don’t put all your eggs in the same basket and diversify as much as you can. There are so many coins out there, all with different functions.
For instance, cryptos like NEO, EOS and Ethereum are all focused on decentralized apps. If you like that sector and think it’s promising, then you should spread your money across different dapp centred coins.
On the other hand, if you prefer the idea of a privacy coin, you could consider investing in cryptos such as Monero, Zcash and Dash. Currencies in the same sector are more likely to move in the same direction, but one might eventually break out, allowing you to re-invest in those you feel are gaining the most traction. If you want to learn more about altcoins, sites like Crypto Head have great advice on both privacy coins and decentralized app platforms you can check out.
Have a Long-Term Strategy
If you like fast paced trading, you can still do that with crypto, but it’s not advised. Ideally, you shouldn’t trade with more than 30% of your assets. You should keep the remaining 70% in case the cryptocurrencies in your portfolio start to appreciate. The technology is still new and is still being discovered by many, so it would be wise to hold some with long term appreciation in mind.
Don’t View Your Crypto as Cash
Cryptos are by and large still much more difficult to use than Fiat, so don’t make the mistake of viewing your crypto assets as cold hard cash. The value of your portfolio is only notional, and could fluctuate greatly, so don’t start spending recklessly because you had a few gains.
The cryptocurrency market can be very rewarding and has a low point of entry.
However, it would be wise to learn as much as you can about any cryptocurrency before you decide to invest your hard-earned money.