Tips for the beginner crypto investor

Tips for the beginner crypto investor
Table of Contents

The article below presents the most important things each and every investor should remember about before entering the cryptocurrency market.

Cryptocurrencies have remained a mysterious novelty in the financial world. At the beginning, they were treated with skepticism by many experienced investors. However, in 2021 it turned out that this is not a trend that will soon pass. It can even be said that this industry has noticed a rapid growth. Since granting legal status as a form of currency, cryptocurrencies have mainly attracted huge institutions as well as banks.

Bitcoin has been growing steadily since it first entered the markets that are easily accessible. It was all thanks to the investors who learned about its huge increases and the possibility to earn money in an easy way. As a result, it became a form of investment available to almost everyone. However, like any other investment, crypto investments can pose some risks. There are many pitfalls and traps for new investors. That is why before investing, it is important to learn more about the specifics of the market. In today’s article, we will briefly discuss the things you should do and the things you shouldn’t do as a crypto investor.

Take into account the enormous volatility

Admittedly, while cryptocurrencies can be an extremely profitable investment if entered at the right time. They are also very volatile and subject to huge price fluctuations. These fluctuations can cause enormous stress on investors. So this is one of the things we should keep in mind when deciding to invest in cryptocurrencies.

Diversify your wallet

One of the most common mistakes investors can make is investing in only one type of coin. The concept of cryptocurrencies is still in a very early stage of development. It is not known which of them will be successful and which will disappear from the market sooner than they appeared. For this reason, entering the market with all your funds into one project is not a good idea. No matter how temptingly profitable a coin seems. It is much wiser to spread your assets over many different coins, balancing your investment in coins with a solid reputation but offering a lower return (such as Bitcoin) with some potentially profitable, yet unstable altcoins.

Only invest as much as you can afford to lose

Just as you shouldn’t put all your capital into one project, likewise, you shouldn’t put all of your money into cryptocurrencies in general. Interestingly, you can apply this principle to any type of investment. However, this is an especially important thing when thinking about investing in cryptocurrencies. Digital assets can be very profitable, but they can also drop to zero in a matter of days. That is why remember to only invest amounts that you are willing to lose.

Avoid FOMO

One of the best ways to invest in cryptocurrencies is avoiding hasty decisions. Before buying, it is important to create a strategy and always stick to it. Many investors can be influenced by the media and hype they create. This can result in making unwise decisions based solely on speculation. What is more, an investor may begin to approach the market emotionally, and this attitude is never good. Emotional trading is the most common loss factor. So, buy and sell only based on hard facts. Also, always remember your initial plan.

Don’t trade too much

When constructing a strategy, it should not be overly complicated. Monitoring your investments is good practice and reasonable predictions may result in making a lot of money. However, being too active and making too many trades can backfire. Especially in such a volatile world the crypto is. Also, remember to NEVER try to make up for your losses at all costs. This practice usually leads to emptying your wallet even faster.

Pay your taxes

Another easy way to lose more money than you can earn is by ignoring taxes. Remember that investments in cryptocurrencies are taxable when converting to FIAT currencies. If you don’t declare your investment earnings, the tax office can impose huge penalties on you.

Be careful

The next and probably the most important thing is security. Although cryptocurrency wallets or exchanges are becoming easier to use as their popularity grows, they also attract more and more scammers. So you will have to be very careful when using crypto platforms. Always make sure you are using a real app from a renowned company. Also, take care of your private keys, because if you lose them, you will never get your funds back.