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With so much cryptocurrency news — from Dogecoin’s rise to Bitcoin’s recent gains — many newcomers want to get in on the action. While investing in crypto can be highly rewarding financially, there are some things a new investor should be aware of before jumping in.
An increasing number of individuals are investing blindly, assuming that it’s easy after seeing success stories or hearing of a friend or family member experiencing a large gain. If it truly was easy, everyone would be a crypto millionaire.
If you are thinking about investing in cryptocurrency, here are five things to consider beforehand. The last thing you want to do is go in blind and unprepared. Don’t believe everything you see on social media — crypto investing is far from easy.
1. Never invest more than you can afford to lose
I like to tell people they should go into it fully aware that they could lose it all, and only invest an amount that you are 100% comfortable losing. Most people will not come out on top after their first few trades.
Sure, there will always be beginner’s luck in some circumstances, but the market is very turbulent and there are many things to consider, many of which are learned while trading live. You can study charts and trends, but nothing compares to what happens when you have real money on the line.
Think of your initial investment as tuition. It’s an investment in learning cryptocurrency investing by trading with real money. If you lose it, chalk it up to an expensive lesson. The last thing you want to do, however, is investing money that you cannot afford to lose because there is a chance that could happen.
Related: 3 Popular Myths About Cryptocurrency
2. Conduct your own research
There is no shortage of self-proclaimed cryptocurrency experts and financial gurus online that all claim to have the secret success formula. They want to sell you access to private Discord servers, Telegram chats and WhatsApp groups.
Never trust someone else when it comes to investing your money, especially someone that isn’t a licensed financial advisor. These characters make their money by selling information, and once they have you they could care less about whether you succeed or fail.
Always do your own research and due diligence before investing, especially if it’s a new coin. I would suggest you watch some YouTube tutorial videos on the subject. When you see how easy it is, you will be much more diligent when it comes to researching potential cryptocurrency investments.
3. Use common sense: If it sounds too good to be true it usually is
If someone is promising you 100x gains on a new coin, be very wary. Sure, there are some instances when early adapters get into a new coin and it skyrockets in value, delivering mind-boggling returns.
For every instance like that, there are thousands of investors that lose it all on a pure gamble play, hoping to experience one of those legendary returns. Also, if you do see nice returns on a coin, take your initial investment out and put it off to the side.
This is what well-disciplined investors do. They aren’t afraid of limiting their potential return by doing this. Not every coin will be a winner, so this strategy allows them to reinvest in something else if the coin tanks due to the rug being pulled.
Related: 8 Benefits of Blockchain to Industries
4. Never act based on FOMO
Most new cryptocurrencies launch with a lot of hype. From aggressive PR campaigns to celebrity endorsements, this can cause a lot of investors to jump in blindly without thinking because they fall victim to FOMO (fear of missing out.)
This can come back to bite you severely and cause you to make irresponsible decisions. A lot of PR is purchased and not organic nor fact-checked. Celebrity endorsements and partnerships are also bought, usually in the form of tokens, giving the individual incentive to pump and hype the coin.
5. Safeguard your keys
Lastly, and most importantly, you need to safeguard your private key phrase. This is the only way to access your cryptocurrency, and if you lose your keys, there is no way to access it. Equally important is the fact that anyone can access and steal your crypto if they have your key phrase.
Never store it on your computer and don’t leave it out in the open. Attempt to memorize it, and write your phrase down and keep it locked up. For even more security, consider writing it down on multiple pieces of paper.
Related: Tax Rules for Buying and Selling Bitcoin
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