For people who are just starting out, investing in cryptocurrency can be a daunting prospect, despite the many potential benefits. Luckily, newcomers can increase their chances of investing successfully by just following a few tips. It’s always important to remember that any investment contains an element of risk. Also, investors should remember that cryptocurrency is a new sector. This means that norms are not always established, and changes can be far bigger and harder to predict. However, over the years since the creation of the first cryptocurrencies, certain ideas have emerged to mitigate the risk involved; here’s a list of our top five tips on how to invest in cryptocurrency safely.
Understand Blockchain Technology
Having a strong understanding of blockchain, the underlying technology behind every digital currency, is a must for anyone who wants to invest in cryptocurrency. Blockchain is a simple, secure technology that allows a completely decentralized record of transactions and ownership, tied to an anonymous ownership protocol which does not depend on passwords, servers, identification, or centralized verification of any kind. Essentially, blockchain digital ledger allowing value to be tracked and verified without central institutions (like banks).
Don’t Put All Your Eggs in One Basket
While cryptocurrencies are a new sector, as an investment opportunity, they have some things in common with more established investment types, and diversification is sound advice that any investment professional would give you. Think about investing in more than one type of coin, or in conventional assets as well. The underlying idea behind portfolio diversification is that you won’t lose all of your resources should one asset fall. In the best scenario, one asset will gain value when another asset loses value.
Use Wallets to Store Your Coins
There are plenty of exchanges, like Coinbase, where you can buy digital currencies, but it should be clear that, since you don’t control the infrastructure of these markets, they aren’t the ideal places to store your newly-acquired digital assets. Hackers have attached many exchanges numerous times, even though cryptocurrency has only been around for a short time. When you want to invest in cryptocurrency safely, consider moving them to a more secure wallet. Secure wallet examples SpectroCoin or TREZOR provide safer storage for crypto assets.
Every investment carries some risk with it – there is no way around this. But you can minimize your risk by taking some precautions, especially when you consider the fact that cryptocurrency is still in its infancy compared to conventional assets such as bonds and stocks. Start by investing a tiny bit of your capital and go from there. Don’t just jump all in.
The market will always move, down as well as up. Price fluctuations are an inevitable part of investing, and all you can do is employ a few strategies to manage the fluctuations such as not putting all your eggs in one basket. Another strategy that many investors use is the “buy and hold”, also known as “buy-and-forget”. This is a long-term strategy where you buy an asset and hold onto it, resisting the urge to sell at every little price hike or fall. The theory here is that it allows you to outpace fluctuations in the market, and take advantage of long-term rises in value.
We hope that these tips on how to invest in cryptocurrency safely have pointed you in the right direction. Just remember to do more research and understand cryptocurrency as much as possible before investing. It might take a while and you might even need the guidance of a cryptocurrency investment professional. However, as with an investment, paying attention to the market, working with professional financial advisors, and learning from your experience will help you to keep your risk under control.