For the last couple of years, there has been a lot of hype about Bitcoin. Then, subsequently, the explosion of varying cryptocurrency that has entered the market. This kind of digital currency has made a lot of promises, but also comes with a lot of risks. Are you thinking of investing? Well, before you do, there are a few things that you need to know.
Tip #1: Don’t Trust Hype Alone
Warren Buffett, the richest man in America as of 2019, knows a thing or two about investing. He once said that the stock market was manic depressive. If this is true, then the cryptocurrency market could be considered downright psychotic. Sure, it’s charming and new. It carries a certain allure, and everybody’s talking about it. However, it doesn’t have a history and is sort of the new kid in town. People are hyped on the promise, but not the results. The fact of the matter is, while there are ups and downs in any market, the cryptocurrency market doesn’t have a lot of history yet.
Tip #2: Get a Coinbase Account
There are a couple of platforms, but none of them are as comprehensive as Coinbase. If you aren’t sure what this is, then you definitely shouldn’t be investing anything in cryptocurrency yet. Coinbase is a platform where you can purchase most major types of cryptocurrency. Essentially, you will use it as your exchange and holdings as your platform to launch your investments. If you’re just starting out with cryptocurrency, then this will be your starting point.
Tip #3: Know Your Crypto
Would you invest in something if you had no idea what it was? Even if you have a basic understanding of cryptocurrency, realizing that it is a digital form of money, you need to recognize that there are also hundreds of different kinds. Most people, when referring to this kind of currency, are interested in Ethereum or Bitcoin. However, there are plenty of others out there, and they are not all created equal. Because of the nature of cryptocurrency, the risk of investment can change drastically and quickly. Pay attention to trends and get a feel for the potential of the major currency types before investing.
Tip #4: Diversify
Much like playing the stock market, you don’t want to put all your eggs in one single basket. After understanding the different types of cryptocurrency, maintain your knowledge and do your due diligence. Then, consider multiple types of cryptocurrency to invest in. This can help you to avoid pitfalls if one drops in value. That way you won’t lose everything.
Tip #5: Stay Ethical
For a market of any kind to work, ethical behavior is necessary. It may not seem that way, with people getting rich all the time by scamming or manipulating the system. These people are the problem. Not only do they shake the foundation of the market that is being built, but they also manipulate it so that they can take their wealth and not spread it around. This is entirely against the ideals of cryptocurrency. For this reason, avoid P&D groups, also known as pump-and-dump groups. They may seem like a good idea, promising big rewards, but remember that they are not there to look out for your best interest. Be smart. Don’t be fools and don’t take part.
Tip #6: Support Your Blockchain
While cryptocurrencies are blockchains, not all blockchains are necessarily cryptocurrencies. With that being said, many of the cryptocurrencies that are available for investment required maintenance of the blockchain. Sites like Steemit and Steem offer a community to invest in, as well as financial opportunities. If you choose to go this way with your investment route, consider supporting the blockchain that you are investing in to be part of its overall health, strength, and popularity.
Tip #7: Don’t Invest What You Can’t Afford
It seems like a no-brainer. If you watch the news over the last couple of years regarding cryptocurrency, then you have heard people making significant gains and great losses in the crypto market. In a market without a middleman, you are taking on more risk. Also, you’re part of the investment cycle in a way that has not been available for investors before. Because of the unknown future, and potential for volatile change, it can be a heavy risk to put in too much. While the overall future of cryptocurrency is still strong, after seeing the bubble burst in 2016 and then the hype of 2017, it is wise to not over-invest.
Tip #8: Protect Your Passwords
On many blockchain sites, they require long and irreplaceable passwords. Do not store them on your computer, unless in a secured folder. If these accounts are lost, there is often no way to back up or get into them. Protect yourself as well as the future of your investment by keeping passwords safe and also consider backups in case anything happens to you. Quadriga was a great example. When the head of their company died, the passwords were lost and along with it $135 million. Ouch!
Tip #9: Get a Separate Personal Email
Your account and portfolio are only as secure as you maintain it. Beyond protecting your passwords, there is more that needs to be done to protect your security, as well as your investments and cryptocurrencies. Keep in mind that there are no banks and no middlemen, which is some of the allure. However, that also means there are no additional securities or laws pertaining to the security of your account. If you lose your computer and access, or somebody hacks your account, you can lose your entire investment. For that reason, keep things compartmentalized and safe. Consider a non-local and not sourced email rather than using Gmail or another popular provider for your crypto accounts.
Tip #10: Maintain a Hot and a Cold Wallet
A hot wallet is one that is connected to the internet, whereas a cold wallet is not. There are times when you need to use an internet-based platform as your wallet, especially when trading or active investing. When you are waiting on decisions or not active with your cryptocurrency, provide yourself with additional security by transferring funds to a cold wallet, so it does not have access to the internet.
There is always a bit of a gamble with investment, but when you play it smart and safe, then you increase the likelihood that you will make money. After all, isn’t that the name of the game? Before participating with any active investments, continue to do your research and get your account set up.
Look Out for You First
No matter what you read around the internet, remember that most of the debate online is not among experts. Financial analysts agree that cryptocurrency, while maybe not as explosively big as Bitcoin was originally, isn’t going anywhere. Protect yourself first and set yourself up solid. The market will be there when you are ready.