Cryptocurrencies are much in hype these days and people are all looking forward to investing in them. If you too have decided to get started with buying cryptocurrencies, you should first understand its realm. Despite its volatile nature, the idea of buying cryptos is on fire these days. People are of the notion that the prices of a few cryptos like Ethereum and Bitcoin rise higher than expected.
Though it is not always true, and you should carry out diligent research before getting started. Experts have been speculating on the prices of cryptos for several years now, and they are making a good amount of money as well. Though, for beginners, the entire process may be a bit daunting. To help beginners understand things better, we have set up this guide.
If you too want to get into the action with crypto investing, you are at the right place. We list a few things that you should watch out for, to ensure that your decision doesn’t go wrong.
Getting Started With Buying Cryptos
First things first. Before you get started with buying crypto coins and investing in them, you need to make sure that the finances are all in order. By ordering your finances we mean that you should have an emergency fund ready, the level of debts should be manageable, and a diverse investment portfolio would be ideal. Have a look at BitcoinTraderApp to have a clear understanding of the entire cryptocurrency concept and get started. Get started with the hope that the crypto investments give you increased total returns.
Without further ado, let us get started.
● Try To Understand The Investments Made
This not only applies to cryptocurrency investment, but you should understand everything that you choose to invest in. That said, even if you buy stocks, you should research a company and also analyze its performance thoroughly. When it comes to cryptocurrencies, there are thousands available, so you should understand every cryptocurrency you plan to invest in.
You should also know that all of them function differently and therefore, understanding investments become critical. With plenty of options available, all of them have their advantages and flaws. Hence, you should figure out the potential upsides and downsides, before buying them.
● Consider The Volatility
The prices of cryptocurrencies are highly volatile as compared to any other assets. The process can drop rapidly based on just a rumor that is pointless and baseless. This is a great feature only for the investors who are sophisticated and who can rapidly act according to the price fluctuations, and also for the ones who have a solid knowledge of the crypto fundamentals. For the new investors who don’t have these skills, the entire thing is a minefield.
Moreover, the high volatile nature of this market can easily crush any new investor. This is because the volatility of this market crushes investors, especially the new ones who get scared of the prices. Having that said, when investing in cryptos, you need to analyze and understand the volatile nature of the market better so that you end up buying low and selling high.
● Invest Only The Amount You Can Afford To Lose
Avoid putting all your money in speculative assets. Cryptocurrency is one of the riskiest assets and if you cannot afford to lose the money, you should not buy crypto coins with that amount. Put aside the amount which you can afford to lose when investing in cryptocurrency. We are not saying that losing money is guaranteed, but due to the high volatility of the market, prices can drop at any time.
No matter if it’s the EMI of your house, or the downpayment of your next big purchase, the money that you will be needing in the next few years should be kept aside. Also, you should keep in mind the security of the broker or exchange that you are leveraging.
● Manage All Your Risks
When you plan to trade any short-term asset, you need to manage the risks involved. This fact is especially true when you deal with highly volatile assets. Having that said, as a new trader, you will have to understand ways to manage the risks better. Also, you can work on developing processes that will help you mitigate losses to a great extent. Furthermore, the process of doing so will vary from one individual to another.
i.) When it comes to long-term investors, risk management refers to never selling the assets, irrespective of the current prices. The long-term mentality of an investor will enable them to stick to their position.
ii.) Risk management for an investor with short-term investment goals, should be to set strict rules on selling the coins bought. That said, if the rate of the investment falls by 10%, they should sell them off. This will help. the trader ensures that a small decline in the prices will not result in major future losses.
New traders are recommended to set aside a portion of money before they get started with cryptocurrency trading. That said, if the position moves unexpectedly, they will have some amount of money to trade further. Managing risks is critical, but at times it can come at emotional costs. Selling something at a loss will hurt, but this will help avoid major losses.
Crypto is not Cryptic
Many investors think crypto is cryptic, but it is not true. Though, before starting a full-fledged investment investors should have an understanding of the concept. One of the rules of thumb with crypto buying and selling is that you should consider the long-term investment. Long-term goals prove to be beneficial with cryptocurrency and an investor cannot dream of becoming rich in a short turnaround time.
In some countries, cryptocurrency investing is still a controversial subject and to understand things better, you will have to carry out your research. There are no set rules and regulations, and all you need to do is to speculate the prices. Though, the advent of technology has made buying, selling and investing in cryptos easier than ever. With plenty of resources available, one can easily get started with the process.