While you often hear about clandestine investors, even teens, investing in things like Bitcoin and reaping huge rewards it can be tempting to see what all the fuss is about and get investing yourself.
However, cryptocurrencies, and its various investment offshoots such as NFTs, are a hugely speculative market, and while there are many success stories within this investment sector, there is definitely an equal amount of people losing a lot of their money through stupid investments.
Whether you are someone with some investing experience who wants to enter the world of crypto, or a total beginner investor, it's worth knowing what you are getting into and hearing some tips before you start locking yourself into agreements that you can get out of.
Keep reading for a beginner's guide to the basics of crypto investing, what to do, and what to look out for. Find out this information below!
Understand What You Are Investing In
Yeah your accountant might be telling you to invest in crypto, or a wife or friend, but taking other people's opinions into account when your money is on the line is not worthwhile unless you also do your own research.
Don't just bet your money on other people's recommendations.
There are thousands of cryptocurrencies out there, while some are really established, others are not. Someone might try to get you to invest in a bitcoin that is a scam, it's certainly happened before, so always do the research.
Look into Bitcoin, Ethereum, Dogecoin, or Cardano as a start, look for stories of scams as well as successes to know how the market operates.
Moreover, understanding how something like the Blockchain works is super important to being proficient in cryptocurrency investing.
While you can invest in certain crypto currencies, the cool thing about crypto is that there are loads of other ways you can invest too such as NFTs, Crypto funds, Blockchain EFTs, Crypto futures, and more.
Most of this can be linked back to an understanding of the Blockchain itself, as well as things like crypto mining, etc.
For example, even if you are a successful investor outside of crypto, understanding that many crypto currencies aren't actually backed by money at all, not assets nor cash flow, investors rely on someone paying more their currency than they paid for it.
Put simply, crypto can't grow profits and drive returns like a company can, it's more about market predictions - do your research!
Know The Market And Stay Up To Date With It
To be a successful crypto trader or investor you need to understand how volatile the market is and how this can really undermine market predictions.
While the past can provide us information about crypto, it's not useful when predicting the future.
For example, Bitcoin was indeed once worth pennies, there was once indeed a huge rise in the market, as well as historic dips, but you can really undermine yourself if you let these historical market changes color your prediction of the future.
You have to consider if these market changes will actually help you predict the future, understanding how speculative and volatile the market is.
In itself, part of tempering your market predictions and expectations is understanding how volatile crypto is as an asset.
Certain crypto currencies can drop exponentially and surprise even the most successful predictors of the market.
To be a successful crypto investor, part of understanding this volatility is to work with it rather than be scared of it.
Of course managing risk is important but many traders move away from crypto due to its volatility, whereas when you understand the market you can use more sophisticated techniques such as buying low and selling high, but only with a strong understanding of the market and how it operates.
Understand And Manage Your Risk
Crypto is often, although not always, a short term asset that is quite volatile. These conditions mean your risk is pretty high for loss, which is something you need to be prepared for.
If you understand risk is high, it means you won't be so afraid of losing small investments, and can help you plan your risk management for genuine success when trading through mitigating loss.
As we mentioned, crypto can actually be a long term asset. Many of those who made lots of money from Bitcoin simply had their stocks for a long time and didn't flunk out when the market dipped, but stayed the course.
Their success is itself born from risk management, which comes hand in hand with an understanding of the market.
When loss occurs we need to be able to manage this itself and have acted in a way where losses are not necessarily the end.
By mitigating the risk in the first place, selling a losing position can allow you to continue trading and regain those losses, rather than a single loss being the end itself.
Don't Invest More Than You Can Lose
Like anything where risk is a factor, gambling or just trading, it's important to be clever about your trading funds so that losses don't ruin you.
If you are a clandestine trader, who hasn't traded before, maybe just a beginner interested in crypto, don't go betting your whole bank account on one crypto stock.
Yeah some people will have made money like this before, but if you lose that you are not only out of the trading game but will potentially lose everything.
Equally, if you are investing a lot and maybe have money to spare, consider lots of smaller investments to learn about the market's movements.
Beyond losing everything you own, in a more microsmic sense, if you have a trading wallet of a certain amount don't necessarily use your whole wallet on one investment.
Like a gambling wallet you want there to be an influx of capital. You want to have enough buffers you have created through risk management so that losing one stock isn't the end of your trading journey, and also that if you do invest, you can still play around with smaller stocks while you wait for a return, to help understand the market.
No matter if you are rich or poor, when your money is on the line, it is really worth knowing the market and stock you are investing in.
Never take someone else's opinion on face value, always check the coin or investing method before you start using your own money.
Crypto is hugely volatile and is full of scams, not even mentioning how confusing and technical understanding cryptocurrencies itself can be, let alone their trading market.
Understanding crypto and its trading market is undoubtedly one of the only keys to success in crypto.
If you don't understand what's going on, where your money is going, then it's really not worth investing your own money.
Even once you understand the market being able to use your money effectively, knowing when to pull and when to stick, there's still a huge amount of risk involved which should be clear to all considering investing in crypto.
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