10 CONSIDERATIONS BEFORE GETTING STARTED WITH CRYPTOCURRENCIES

02/18/2021

Are you ready to try cryptocurrency investing? So your first question might be this: “What the heck is a cryptocurrency, anyway?” Simply stated, a cryptocurrency is a new form of digital money. You can transfer your traditional, non-cryptocurrency money like the U.S. dollar, British Pound, European Union Euro, Japanese Yen, Indian Rupee digitally, but that’s not quite the same as how cryptocurrencies work. When cryptocurrencies become mainstream, you may be able to use them to pay for stuff electronically, just like you do with traditional currencies. Some of the most important things to think about before starting your crypto investing journey

1. It's exciting but think it through

Starting to explore a whole new world of crypto trading/investment is always exciting. Starting early can also sometimes get you ahead of the crowd. However, just like any type of Investment Option, cryptocurrency investing requires discipline, risk management, and a whole lot of patience. You shouldn’t treat crypto investing as a get-rich-quick scheme. Even though your hopes may be up, especially since the market saw whopping returns in 2017, the likelihood of seeing such gains in such a short amount of time again is pretty low. The reason is simple: The bubble has burst. Investors are becoming more educated about the whole market, making more calculated investment decisions. So should you

2. Know Your Risk Tolerance

Is crypto investing right for you? How much of your money should you park in this market? Can you handle high volatility? Do you have the patience to wait out potential ups and down? You can find the answer to all these questions by analyzing your risk tolerance. This essential first step to any type of investment includes both your willingness to risk and your ability to risk in terms of finances at your disposal

3. Safeguard Your Crypto Wallet

A crypto wallet is where you store your digital assets like Bitcoin; you have to have one before you buy or trade in a cryptocurrency. So many different types of wallets are available, some of which come from the cryptocurrency exchanges that sell you the cryptos. But those aren’t the most secure types of wallets, and they’ve often been the victims of hacking attacks that resulted in the loss of cryptos

4. Find the Best Crypto Exchange/Broker for You

Some of the most popular places to get your hands on cryptocurrencies are exchanges and brokers. Some of these marketplaces offer only a few cryptocurrencies, and some carry a wide range. Some have higher transaction fees. Some have better customer service. Some have a better security reputation. With some, you can exchange your fiat currency (which is the local currency of your country) for cryptocurrencies. With others, you must already have a cryptocurrency, like Bitcoin, and exchange it for other digital assets, like Ripple or Litecoin

To find the best crypto exchange or broker, you must go through all these options and see which one fits your crypto needs most. Oftentimes, you’re better off using multiple exchanges for different purposes

5. Invest in the Long Term or Short Term?

The time frame you invest in depends on your risk tolerance, your financial goals, your current financial situation, and the amount of time you have on your hands. For example, if you have a full-time job that requires most of your attention, you don’t want to worry about short-term management of your crypto portfolio, or any other asset for that matter. You want to focus your energy on your main job (so you don’t get fired) and manage your investment portfolio every few weeks or so to stay on top of things. Investing long term also requires less risk-taking

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6. Being Conservative is Wise

If you’re just testing how crypto trading works and don’t have a solid financial plan, then don’t dump a whole chunk of your money into the market. Start with a few hundred dollars, or whatever you can afford, and slowly grow your portfolio. Also, don’t use your money to invest in only one type of crypto. If you’re new to investing in anything, don’t allocate all your investment funds to cryptos, either. Diversification is key until you find your optimum returns, especially for new investors

7. Consider Investing in Familiar Areas First

If you’ve never invested in anything, you may find the whole cryptocurrency industry a bit overwhelming. Educating yourself about developing investment strategies while also learning about a financial sector you’ve never had any personal experience with can be difficult. In this case, you may consider starting by investing in things you know, like the stocks of a company you’re already familiar with. After you become comfortable investing in things you know, you can then expand your portfolio to new avenues like cryptocurrencies

8. Join a Support Group

Most people trade alone on their computers or smartphones. That can soon become a very lonely activity, especially if none of your friends are into it. When the markets are going against you, you can get frustrated, and when the markets are doing well, you may get overwhelmed, not knowing when to get out. Many cryptocurrencies have channels on the Telegram app or their very own rooms on websites like Reddit and BitcoinTalk where people share personal investment strategies across different asset classes like stocks, forex, and cryptocurrencies. In addition, it’s very internationally diverse members also actively participate in the conversation, helping one another with things like finding the best exchanges in their local countries, asking questions you may not have thought of, and more

9. Help a Good Cause

Many cryptocurrencies are based on blockchain applications that aim to solve a specific problem in the world or in society. Blockchain applications can provide a solution to almost any problem that’s important to you, from banking to preventing voter fraud to helping out farmers. By investing in the cryptocurrency of a blockchain application whose cause appeals to you, you support that cause in achieving its goals faster. This sense of accomplishment can make investing more meaningful and more fun for you. Focusing on causes also helps when you’re picking cryptocurrencies out of the hundreds of options available

Read here how blockchain is contributing to the Real Estate Industry

10. Consider Mining

Mining is the backbone of many cryptocurrencies like Bitcoin. Mining cryptocurrencies refers to solving complex math equations by using powerful computers; successfully solving the problems earns you a reward in cryptos. Mining is normally considered very expensive because you have to invest in expensive computer gadgets and use up a lot of electricity while you run your computer for mining. But sometimes, especially depending on the cryptocurrency’s value, mining may make sense. For example, if your electricity bill for mining is going to be lower than the cost of actually buying that cryptocurrency, you may want to consider mining instead

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