The cryptocurrency market took a plunge in 2018 after it saw an immense increase in the last months of 2017. There are many theories as to why this happened, but no one really knows for sure. Even though the price drop has scared off many investors in selling their assets, there are plenty of crypto enthusiasts that want to get in the game.
But before you dive in the exciting and volatile world that is crypto investing, we shall present a few tips and information that we hope will be helpful to you.
1. Market Volatility
The sharp decline in 2018 has impacted not only the market’s price but also the mentality of investors. Those that bought BTC when it was around 18,000$ panicked and sold when it hit 15,000$. Not to mention that those that had large amounts of smaller coins, which plummeted as well, were sold off instantly. Some of these coins bounced back, others went even further down the drain.
The crypto market has a very volatile nature, from incredible gains to shattering lows. This market is also very influenced by news and events. For example, if a coin announces a new partnership with a high profile company, this increases the community’s trust in the coin and might run up the price. Or if a country starts announcing that it will be implementing harsh regulations for crypto businesses, prices can also go down.
When you buy cryptos you have to be aware that you might end up losing everything. You should never invest more than you are willing to lose.
2. Research is essential
The internet is the source of all the information a crypto investor uses to asses a crypto asset. With that being said, you should be extremely careful what sites you use in researching your next investment. Some might overhype the product; others might be extremely critical. You have to approach every information with a bit of cynicism and level-headedness.
Thoroughly research a crypto asset. Its team, business proposition, roadmap; you must look into every aspect of a project to see if it is a legitimate investment or not. Also, the project has to have some applications or to be a solution to a real-world problem. A solid whitepaper means nothing if the project/product has no purpose.
And even after you‘re done with all that research you still have to keep yourself updated about new development and events that might affect your coin.
3. Diversity is the Key
There are currently more than 2,000 different coins and tokens on the crypto market. Your cryptocurrency investments should not be all in one place but spread across the market proportionally.
Bitcoin and Ethereum are the most well-known and established cryptos and are the go-to coins for most investors. Therefore, it is recommended to have an investment in both coins as large cap coins are relatively more stable and allow you to exchange with other altcoins.
If you are willing to get into crypto investing, know that you will have to spread your money in various coins that cover different sectors. You will also have to learn to spot shitcoins from coins that have potential and real applications.
“Shitcoins are coins that do not have good fundamentals and are created with the purpose of scamming the masses. They’re often associated with ‘pumps-and-dumps’ and Ponzi schemes, and are a great way to lose your money.
4. Long-term investing
Trading is fine, but ideally, you shouldn’t trade more than 30% of your crypto assets. The rest of the 70% should be kept for long-term appreciation. Blockchain technology is developing, and in the future, there will be exponential growth. To capitalize on this growth, you should look to keep your crypto investments for a long term.
Cryptocurrency is not a quick investment scheme to generate profit. if you are in it just for short-term gains, then you should probably look into forex markets for trading.
5. Beware of Cryptocurrency Scams
Unfortunately, cryptocurrency scams are at almost every corner of the internet. For a newbie investor, it can be quite hard to avoid them. Statistics indicate that more than $2 million were stolen by scams in the second quarter of 2018 alone.
The most common scams are fake ICOs, Ponzi scheme exchanges, and Twitter bots.
ICOs are the crypto version of an IPO. They generate hype around a fake IPO, but once they get their funds from investors, they disappear without a trace.
Twitter bots mimic official accounts of important people or companies from the crypto industry. They typically promise giveaways of a particular coin in a few days in exchange for a small deposit either in fiat or crypto (mostly ETH and BTC).
You also need to keep an eye for Ponzi schemes which parade themselves as altcoins, as there have been many known cases that have left investors high and dry.
The crypto world is at the same time an exciting and terrifying place for an investor, governed by volatility and speculation. A coin could be the next big hit in one minute and then plunge in the next. Always proceed with caution when putting your money in a crypto project or coin.