Cryptocurrencies of all types have burst onto the scene. They’ve gained legitimacy as various nations start regulating them as currencies or investments, causing many more people to see them as a legitimate investing opportunity instead of a speculative technology.
Here are the do’s and don’ts for investing in cryptocurrencies so that you don’t make a mistake when investing in this new area, regardless of which cryptocurrency you choose to invest in.
Do Your Research
Do your research before you invest in cryptocurrencies. Understand the technology involved so that you don’t try to buy cryptocurrency but get stumped when it’s time to get a wallet. Don’t store everything online, since this leaves it open to theft by hacking or loss due to a technical glitch.
Unless you have no other choice, don’t store your cryptocurrencies on the exchanges that you use to buy and sell them, at least not for the long term. Also, make sure you know which exchanges are legitimate.
If you’re looking for good reputable exchanges in Australia or want to know how to buy cryptos safely in Australia, a great place to start is with Crypto Head’s guides.
Don’t Rush into the Hottest Thing
The worst time to invest in anything is when the bubble is growing, or the investment is seen as “hot”. You’ll see money pour in on the expectation that the trend will continue up, and people continue to invest or drive up the price because of the irrational enthusiasm. This means they’re less likely to analyse the fundamentals and understand the factors involved.
They may also invest in cryptocurrencies that have no business case behind them but simply get attention and investment because they’re new. Instead, invest in what is going to hold its value over the long term.
Do Keep Your Eyes on the Prize
It is easy to go into a panic at any sign of volatility, whether it hits a new high or falls to a fraction of its prior value before returning to its prior level. Look at investing in cryptocurrency as just another investment, buying when low, selling when high, or buying it and holding it. Staying calm will save you from mistakes like panic selling. It will also reduce your stress level.
Don’t Invest Everything in Cryptocurrency
Don’t go crazy and pour everything you have into cryptocurrency. When you start off, invest only what you can afford to lose. This ensures that you don’t actually lose everything if you make a mistake with the cryptocurrency wallet or use a bad strategy when trading cryptocurrencies.
A side benefit of this strategy is that you won’t end up losing a lot of money if you ended up buying at the peak of a bubble that subsequently burst. Another benefit of investing what you can afford to lose is that you’ll keep enough money on the side to cover emergencies instead of being forced to sell cryptocurrencies at a low point so that you can pay for some bill.
Cryptocurrencies are attractive because of their novelty and potentially spectacular gains. However, they need to be treated like any other investment opportunity. Proper research, perspective, patience and balance allows you to invest in it with no more risk than necessary.