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The dos and don’ts of crypto investing

Crypto investing offers opportunities to make money, but risks are involved. So consider these dos and don’ts of investing in cryptocurrencies.

image of 3 popular crypto coins
Image: Pixabay

The latest statistics suggest that almost 60 million Americans owned cryptocurrencies in 2021. As a result, crypto investing is becoming increasingly popular, but the headlines are not always positive.

If you’re thinking about delving into the world of crypto investing, it’s wise to tread cautiously. In this guide, we’ll outline some dos and don’ts to help you reduce risks and increase your chances of making money. 

Cryptocurrency investing dos

many crypto coins falling
Image: Pixabay

Understand the risks

Cryptocurrency is the newcomer on the investment block, creating enormous interest and buzz.

On the surface, it may seem like people make vast sums of money from investing in Bitcoin and other currencies, but this is not always the case.

There are horror stories about significant financial losses, and cryptocurrencies are vulnerable to sharp price decreases. So the number one rule when investing in crypto is to make sure you understand the risks.

Investing in cryptocurrencies never guarantees profits. The markets can be volatile and unpredictable, causing prices to rise and fall quickly. As a result, this is a relatively high-risk investment option, especially in the short term.

You could buy currencies and make a lot of money in weeks, but you could also lose a lot.

There is no way of guaranteeing that prices will increase once you’ve invested, and there are multiple variables to consider which influence crypto prices.

Ensure that you understand how markets work and learn to identify factors that drive increases or decreases.

Major influences include the demand for currency, competitor prices, demand, supply, and investor movements. If the demand outweighs the supply, prices will rise. 

Research

bitcoin and $100 dollar bill
Image: Unsplash

Research is crucial for investors considering any investment. However, cryptocurrencies are relatively new, and there are several factors to consider as a beginner.

These include which types of currencies to buy, when to buy and sell, how much to spend and how to maximize the chances of getting the timing right. 

Before you spend money, carry out thorough research. Monitor the markets, check prices daily, read news articles and financial blogs and see what experienced investors say. Then, look for trends in the data. 

Use trials and demos

Investing can be daunting when you’re a novice and putting money at risk for the first time.

If you’re not ready to dive in at the deep end or want to hone your skills and get a feel for investing, using free trials and demos is a brilliant idea.

With this option, you can manage trial investments without risking any capital. You take control of a dummy portfolio, and you can decide when to buy and sell without taking risks.

Using trials to learn about systems and market influences before spending your money is beneficial. 

Create a strategy

Investing may seem relatively simple, but it requires skill and strategic planning. So if you’re eager to invest in cryptocurrencies, it’s wise to draw up a strategy in advance.

Set a budget, think about your investment term, outline key objectives, research, and align movements with your goals. Consider exit points and highlight opportunities that match your targets. 

Explore options to diversify

Cryptocurrency market
Image: Unsplash

Putting all your eggs into one basket can be a dangerous strategy for investors, especially if you are focusing on cryptocurrencies.

It’s beneficial to explore options to diversify, including buying different currencies to reduce risks. For example, if one coin plummets, you may not suffer significant losses if other currencies are performing well.

It’s also a good idea to consider other investments to expand your portfolio. For example, you may want to look into buying stocks or commodities.

A diverse portfolio is more resistant to price fluctuations and losses and can also help you take advantage of new opportunities and trends. 

Choose reliable, legitimate trading platforms

Investors have more options than ever regarding trading platforms, sites, and apps. Unfortunately, while many are legitimate, some are not reliable and trustworthy.

Always research exchanges and sites before you deposit money. Read reviews and user testimonials, ask people you know for advice and recommendations and ensure that portals and exchanges are secure. 

The don’ts of crypto trading

Many different coins including dogecoin and Shiba Inu
Image: Unsplash

Act too quickly if prices fall

Falling prices can trigger mixed emotions in investors. Those looking to buy may feel that low prices offer opportunities, while those who already have investments may think they need to sell before the numbers drop even lower.

In both these scenarios, it’s vital to consider the context. Prices fluctuate regularly in this market and can rise and fall very quickly.

Buying when prices are low is not always a good idea for aspiring investors. If demand falls, prices will drop further, and there’s no guarantee they will rise again.

If you are thinking about selling, it’s worth analyzing the data and looking for trends to help you determine whether it’s a good time to sell.

Prices could increase again, especially if you’re willing to ride out downturns and keep hold of your cryptocurrencies for long periods. 

Invest all your money at once

Marketing campaigns and targeted ads can be persuasive and often encourage investors to spend as much money as possible. However, if you are new to investing, resist the temptation to invest all your money at once.

Going all-in carries high levels of risk. If prices tumble, you could lose everything. Be cautious. Start small and grow your portfolio as you gain more confidence and knowledge. 

Fall for scams

Cryptocurrency scams cost Americans more than $1 billion in 2021, according to a report by the Federal Trade Commission.

So if you want to invest, be wary of adverts and links that seem too good to be true, research reputable platforms and investors, and always check that messages you receive or sites you visit are legitimate. 

Crypto investing offers opportunities to make money from buying and selling digital currencies, but risks are involved. So consider these dos and don’ts of investing in cryptocurrencies before you spend any money. 

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Chris has been blogging since the early days of the internet. He primarily focuses on topics related to tech, business, marketing, and pretty much anything else that revolves around tech. When he's not writing, you can find him noodling around on a guitar or cooking up a mean storm for friends and family.

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