Undoubtedly, the cryptocurrency industry has many projects from coins to companies that are worth investing in.
Anti-crypto communities and analysts claim that investing in crypto isn’t the best investment to make, referring to the volatility and unpredictability of the crypto market.
Regardless of their criticism of the nature of the crypto market, investors still make millions of dollars each day from trading cryptocurrencies.
Hype aside, both enthusiasts and non-enthusiasts are witnesses to the fact that the crypto market is no fad.
Just like genomics, nascent is still the word that should be used to describe the crypto market, attracting scammers and innovators. Ergo, despite its growing value, the decision to invest in crypto should not be taken sparingly.
So before you jump onto the crypto bandwagon, just like any other investment, researching how it operates will help eliminate any negative experiences with fraudsters and risks. Here is a checklist of processes, resources, and platforms you should know before investing in cryptocurrency.
ICOs (Initial Coin Offerings)
Initial coin offerings refer to a form of fundraising where companies raise money for a new crypto venture by creating and selling new cryptocurrencies. This form of crowdfunding was prevalent in 2017, although it is not very much on the news currently.
Several initial coin offerings come with investment opportunities, as well as risks. Before investing in a company that is taking the ICO route, examine if the solution they claim to provide is needed by blockchain technology and also study their white papers.
Security Tokens Or Coins?
Before putting a dime in crypto as an investment, knowing about what you are investing in and what you will gain from making such an investment is crucial. With more than 5000 cryptocurrencies in existence, each cryptocurrency can either be a coin or a token. Hence, investing in cryptocurrencies is more than buying a Bitcoin and keeping them in your wallet to make a profit.
There is a big difference between security tokens and coins, from their use cases to the amount of value that is attached to them. While security tokens use cases are related to utilities and securities, such as shares, preferential treatment, and services, coins are created mainly for monetary value.
Storing Your Cryptocurrency:
For a new crypto investor, cryptocurrencies can be stored on a crypto wallet, which can either be a cold or hot wallet. Hot wallets can be used via crypto exchanges and mobile devices, while cold wallets keep cryptocurrencies entirely offline.
A crypto wallet can be accessed with what functions as a super-secure password known as a private key; this should be kept safe to prevent unauthorized access.
Security, accessibility, and reliability are the yardstick of what investors should expect from a good wallet. Coin Stats crypto wallet is a safe option to manage all your crypto and Defi in one place.
Can You Afford To Lose Everything?
A notion that entices many newbie investors into the crypto industry is that you can wake up a multimillionaire after investing. While this notion might be true in some cases, it is also greatly illusionary when it becomes the force behind your crypto investments. Arguably, investing in crypto is a speculation game, which is very different from conventional investments made in the stock market.
In the crypto market, millions are made overnight, and millions are lost overnight. Perceived scarcity and sentiment are among the central pillars of the crypto market, so there is so much unpredictability.
You can go from being a multimillionaire in the crypto industry to having hundreds or a few thousands of dollars left; those who invested in $Luna can testify to this.
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Are You a Passive Or Active Investor?
Before making any cryptocurrency investment, a line should be drawn on whether you will be an active investor or a passive investor. The difference between an active and a passive crypto investor is the level of involvement. An active crypto investor is directly involved in launching a new product, while a passive investor operates at arm’s length.
A clear description of the differences theseDefi two share is during initial coin offerings (ICOs). An active investor during ICOs might even be among the board of directors or play another active role.
On the other hand, passive investors might want to put their money into the project, sit back and let the development team and the market do what they know best. Hence, pick out where you belong early enough before investing in cryptocurrency
Beware of FOMO:
Fear of missing out has landed many newbies and experienced crypto investors into starting from scratch. There have been cases where scammers create what looks like a crypto project, pay influencers to hype the project, and lure unsuspecting investors into investing in the project.
Read the white paper of a cryptocurrency and evaluate the use cases and its long-term potential before any investment is made.
During a bull market, proceed with caution, as the prices of crypto may rise sharply, and any slight correction in the market leads to huge losses. When a crypto project feels too good to be true, take a step back and evaluate if you can afford to lose what you will invest.
Create an Investment Strategy:
What differentiates successful investors from the rest is that there is a level of knowledge they have that others don’t have, leading them to plan ahead of others. An insight into how the investment strategy of a crypto investor might look is that they set a limit order. A limit order means that when the cryptocurrencies they invested in reach a certain amount, they are automatically sold, and part of the profit is reinvested.
Another form of investment strategy is that a maximum amount can be invested in a particular coin. This means a crypto investor may plan to invest a maximum of $3,000,000 in Bitcoin and then $1,000,000 in Ethereum. Plans like this change from time to time depending on whether the market is bearish or bullish.
Not getting caught up with the noise made by crypto communities is one of the biggest challenges faced by those investing in cryptocurrencies.
The unpredictability and volatile nature of the crypto market continue to be the focal point of the criticism of analysts and non-enthusiasts.
Learning more about the crypto market is recommended to avoid making terrible mistakes, apart from the inherent risks of the crypto market. Learn about ICOs, storing your cryptocurrencies, differentiating cryptocurrencies, and other essential things.