Let’s be honest here. You’re unlikely to suddenly get rich by investing in cryptocurrency. Those who made a fortune in this sector either had a lot of capital or invested early on.
However, now, when the entire world is investing in cryptocurrency, you’re unlikely to make a big break by simple trading.
This, however, shouldn’t discourage you from taking advantage of this sector’s opportunities. We’re only trying to clear up the facts for you because delving into this sector can be risky, and if you go ahead with a misconstrued notion, you’re making a big gamble. Therefore, you first need to be clear about what you’re getting into.
The best way of looking at cryptocurrency is to view it as just another form of investment. It helps in removing the mystique surrounding this sector. It’s not a magic pill and is unlikely to take you from rags to riches. It isn’t to say that there aren’t any success stories around, but those are exceptional cases.
If you start with the mindset of making money by hook or crook, there’s a high probability that you will misinterpret many things and face loss. However, a firm understanding of the ground reality and the factors surrounding the situation can help you do better than your peers in this sector.
Once you’re clear about these things, you can go ahead and make use of established platforms like Currency to get started.
Read more: The Pros & Cons of Forex and Stock Trading
The Pros and Cons of Cryptocurrency
As mentioned above, cryptocurrency isn’t a magic pill; it has some pros and cons. We’re listing them here so you can understand what you’re getting into. Once you’re clear on these points, we’ll guide you on ways to get started in this sector.
The cryptocurrency market is highly secure. Considering that it’s backed up by blockchain technology, it’s safe and encrypted. All your transactions are stored in a digital ledger that users maintain. It makes it resistant to any attempts of tampering and fraud. Unless the platform you opt for has vulnerabilities at its end, you can rest assured that your transactions are secure in the blockchain.
It is also unregulated, meaning the market is independent of governmental actions. So while the governments can surely ban cryptocurrency, it doesn’t affect the market’s core operations. This also means that the exchange rate depends entirely on the demand and supply rather than the fiscal policies set up by the central bank. This makes cryptocurrency highly popular.
The market is highly volatile, so it rapidly goes up and down. This makes it one of the riskiest forms of investment. If you’re not smart about your assets, you can incur significant losses, and that’s not the right way to go about this sector. Therefore, understanding the risk factor here is crucial and can’t be emphasized enough.
There’s limited use for cryptocurrency at the moment. If you have your savings in cryptocurrency, you’ll have to liquidate your investments if you need the cash. Moreover, if the market is at an all-time low at the time of liquidating your reserves, you will stand at a loss. Therefore, this is another factor you need to keep in mind.
3. Getting started
If you’re clear about the factors above and are willing to go ahead, this section is for you. Here you’ll learn about investing in cryptocurrency, particularly how you can get started if you are a beginner.
4. Conduct your research
The first thing you should do is try to develop an understanding of the market. This means that you must conduct extensive research on the factors that affect the market and how public sentiment translates to the graphs you see on your screen. Moreover, you need to conduct your research about different cryptocurrencies. Your primary focus should be on their technology and how they have been performing lately. Your secondary focus should be on exploring their potential.
5. Pick the right currencies
Once you understand the market, you must choose the currencies you initially invest in. A good rule of thumb is to make an 80:20 portfolio comprised of established currencies, leaving some space for other emerging contenders. Not only would this help you minimize risk if one of those currencies falls in market value, but it would also help you maximize your gains because not every currency performs the same way.
6. Pick the right exchange
You need to pick the proper exchange to make your first investment. You should look for reputable names that are renowned for their security. Securing your investments and your credentials should be your foremost priority. There are many popular exchanges in the market, but a good rule of thumb is to go with an exchange that people you already know are using. They can guide you on the ways to get started, and you can then make your first investment. Binance and Coinbase are among some popular exchanges.
7. Stay vigilant
Once you make your first investment, you must stay vigilant and act promptly. People often think cryptocurrency is a limited-time job compared to their 9 to 5 job. It, however, isn’t the case. Cryptocurrency requires you to be vigilant at all times. Since no central authority controls the market, people trade their investments at any time. Therefore, if you’re lazy about making the right move, you risk incurring losses and could potentially lose your investments. That being said, this does not mean you should constantly look at your screen. Knowing when to act and then acting timely is the key.
The tips mentioned above can help you get started in cryptocurrency trading. However, one thing you need to be very clear about is that the ability to predict market behavior distinguishes good investors from average investors. So you should develop the ability to anticipate when the value of your investments will go up or down. If you believe that you cannot predict market behavior at the moment, you should shadow the market for a while before making your first investment.