There are no two opinions that cryptocurrency has been on fire recently, and several investors are trying to profit from its red-hot popularity. Well-known cryptocurrencies like Bitcoin have surged, and other popular currencies are also going down a similar path.
While crypto has entered mainstream conversation only recently, seasoned traders have been speculating its surge for years. But are you new to the scene and trying to get a whiff of the action?
Here are seven cryptocurrency investment tips for beginners.
1. Analyze the Platform You’re Choosing
The first step any crypto trader has to take is to decide which platform they’re going to trade on. If you’re in the US, you’ll only be allowed to use regulated platforms. An exchange’s liquidity, fees, and asset liquidity are among the top considerations a trader must make while selecting a platform. The crypto market is notorious for being highly volatile.
So if you’re a trader who is eager to make a profit quickly, you’ll always need to have a pulse on the market. In most cases, the first choice isn’t usually the best when you’re trying to figure out where to trade crypto, and for a beginner, the differences between platforms can be overwhelming.
Here are some of the most important things to consider when you’re looking for a crypto trading platform:
- Operational years: If an exchange managed to stay in business for a long time, it’s a sure-fire way of knowing that it is credible and stable
- Cryptos supported: Knowing which currency is available to trade before you join a platform can be a valuable way of knowing if a platform is worth your time
- Transaction fee: This is what crypto exchanges charge sellers or buyers when they’re executing a trade. Every cryptocurrency exchange has a transaction fee. This helps them earn revenue. The transaction fee structure also depends greatly on the exchange’s overall strategy. For instance, some exchanges don’t charge a transaction fee for bigger trades ($10,000 and above) to promote bigger trades
- User reviews: Visit various crypto communities and groups (check out a few on Reddit) and the platform’s feedback. This is a great way to evaluate the platform
- Exchange liquidity: This is perhaps one of the most important factors to consider. This tells you the speed and the accessibility of converting one asset into another. The best exchanges have high liquidity, meaning you’re not going to see much difference between the asking price and bid price
2. Know What You’re Investing In
Just like any other investment, you must know what you’re investing in. When people invest in stocks, they go through the company’s prospectus and financials. It would be best to do the same with cryptocurrencies since there are so many of them. All of them work differently, and new currencies are created almost every day.
You first need to know that there are cryptocurrencies that aren’t backed by anything. There’s no cash or any tangible assets. Bitcoin stands on an identical structure. In the crypto world, investors rely on other investors to pay more for something than they did.
Unlike the stock market, in which the company can churn out a profit and then give you a portion of those returns, cryptocurrencies rely heavily on the market to become bullish. When it does, investors enjoy large profits.
Some of the most popular coins these days are:
- Cardano
- Ethereum
- XRP
- Dogecoin
So before you invest, understand the upside and the potential downside. If the currency you’re investing in isn’t backed by anything, all of your investments could reduce to rubble.
This is when you’ll have to indulge in:
3. Research, Research, and More Research
If you’re eager to start quickly, start with a small investment. These will help you understand the basics of crypto trading while you research bigger and better currencies. Beginners are often recommended to start with small currencies because the crypto market changes quickly.
Another important factor for beginners is to seek guidance from experts.
4. Automate Your Purchases
Like with the stock market, you can automate your crypto exchanges to enjoy the advantage of pound cost averaging.
- Pound-cost averaging: when the market is dropping, investors use this strategy to mitigate their losses. If you’re an investor and you have a large amount for investment, you can invest it all at once to purchase every single unit at the same price. So if the value rises or decreases, profit and loss per unit will be similar.
Most crypto exchanges (like Gemini and Coinbase) can let you set up recurring buys. This is when an investor tells the platform to purchase a specific amount of cryptocurrency they want every month. For instance: $100 worth of Bitcoin every month. This means they purchase a little of their desired currency when the prices are high and a little more when they’re low.
That said, this isn’t easy to master.
https://www.purevpn.com/affiliates?pAffId=483035. Managing Risk
Several people that are offering you crypto tips may not have the best intentions at heart. Avoid getting stung to avoid a common mistake most beginners make. Set a limit on how much you’re willing to invest towards a particular currency, and don’t invest anything that you’re not willing to lose.
6. Diversify Your Crypto Portfolio
We’ve all heard it before: don’t put all of your eggs into one basket. As with stocks, spread your money over different currencies so you can reduce the risk you take on. This means that you’re not over-exposing yourself to only one currency. In the case its value plummets, you lose everything.
This is particularly important in the case of crypto since it’s highly volatile.
7. Lastly: Stay in it for the Long Run
There are two primary ways of earning from the crypto or stock market. You can either trade daily or weekly and enjoy the small profits you get from your transactions, or you can buy a promising currency or share and see where it takes you.
A novice trader is often going to be duped into panic selling when the market crashes. Don’t do that. The crypto market isn’t going anywhere, and leaving what you have in the market can benefit you in the long run.
It’s just going to take a lot of patience!
