Investing in Cryptocurrencies – 4 Rules to Follow!
Ever since the Bitcoin boom, the keys to investing in cryptocurrencies has been the talk of the town – no matter where in the world you go. Investors are looking at the realm as one of the most lucrative investment opportunities available today, with little evidence to contradict this perception. The only flipside to this is that unlike other more conventional investment opportunities, the art and science of investing in cryptocurrencies are quite different and may require more attention to the details – at least if you are starting off.
Before investing in the crypto space, it’s important to take a couple of very important things into consideration. Having a clear understanding of these areas will prepare you for a relatively smooth introduction to the crypto space – granted, it may not always be sunshine and rainbows! Let’s run through our 4 dos of investing in cryptocurrencies.
When investing in cryptocurrencies, only throw in what you’re willing to lose
We know – that isn’t exactly the most encouraging thing to start off with but stay with us for a minute. Volatility is one of the most identifying attributes of the crypto space – without it we wouldn’t have experienced the boom that took place a couple of years ago. Keeping that in mind, understand that crypto investment has significant risks and there is always a possibility you could lose more than you put in, therefore, only put in what you are willing to lose.
The great thing about the crypto space is that as bad as a period of loss may be, there are also periods where the gains are much better – you just need to know when and how to hold… this leads us to our next point.
You know the saying – patience is a virtue. While this is true in every aspect of life, it is especially applicable to the crypto space. Far too often we see amateur investors make uncalculated decisions by hopping on and off various cryptocurrencies based on short-term trends, which is never the right move to make. “Panic selling” is perhaps one of the biggest consequences of investor impatience where you see investors selling off their coins at even the slightest percentage drop – fearing a bigger drop.
If you do see a drop taking place, wait it out and ride the storm. The history of crypto trading shows that most currencies recover losses in a relatively short period of time – just look at Bitcoin and how it once fell to $2900 before catapulting to over $7500.
The markets are unpredictable
Random web searches of crypto trading tips, predictions, and trends will introduce you to a diverse group of people claiming to be experts that can offer you the latest predictions on the market based on their insights. This is bogus.
Cryptocurrencies are unpredictable and there are no laws, theories, or explainable trends that can point to a method that governs their prices. The prices are based purely on supply and demand, which is significantly influenced by market sentiment over anything else (both unpredictable and unquantifiable).
It’s important to pay attention to the signs more than focusing on making random predictions. For example, if a major international policy shift is expected to take place – South Korea banning cryptocurrencies for example – then you can expect this to have an impact on the crypto world. Focus on the industry and the latest news, not blind speculation.
Know your coin
With hundreds of Initial Coin Offerings (ICOs) popping up every day, new coins are being released that crypto investors can buy into. While this makes the entire space more diverse, it also means there is tons of room for fraud and failure. Many people have lost a lot of money when investing in coins that came out after ICOs that failed to build success beyond their coin offering.
Therefore, only invest in a coin if you believe that the company behind the ICO is genuine and actually represents a project that has real potential. Take investing in an ICO as buying an actual piece of technology and ask yourself if the tech you are about to invest in is actually something you would use/be interested in? Is it scalable? Be very thorough in your evaluation, speak to the ICO initiators, and engage in the ICO’s communal platforms.Only once you are certain should you invest.
Crypto investing is a unique art and if you’d like more tips, stay tuned to our blog series. If you would also like to know more about IAME, please free to visit our website and read our white paper. Got any feedback, comments, or questions? Feel free to contact a member of our team by visiting our Gitter channel, Facebook page, or by following us on Twitter.