With the recent boom of Bitcoin, many people have begun looking at the industry as a potential asset in their portfolio. Furthermore, avid traders are attracted to the market because of its volatility and reward potential. Cryptocurrencies, in general, can be intimidating but that shouldn’t stop you from exploring and potentially benefiting from this new and expanding market. This article will give you five investment tips for those looking to enter this market for the first time.
INVESTMENT RISKS: All investments, including cryptocurrencies, are speculative in nature and involves substantial risk of loss. We encourage potential investors to consult an accredited financial advisor. Never invest more than you could afford to lose.
Tip 1: Understand The Technology
Before you invest in anything, it is important to understand why there is value in the asset. With Bitcoin and other cryptocurrencies, the goal is to eliminate the middleman and allow people to transact with each other, also known as peer-to-peer. Blockchain technology is the backbone of Bitcoin and is a secure and potentially effective way to transact on a global scale. There are other assets that use the blockchain technology and are also successful. So, it is your responsibility to figure out which coin is using this technology. Let’s not also forget XRP coin that uses the Ripple technology. Understanding the technology behind cryptocurrencies will show you the value they bring.
Tip 2: Choose The Right Means of Exchange
There have been many lesser quality exchanges out there and that is still true today. Cryptocurrencies are still new and maturing, and with that comes learning from growth. If you want to invest in Bitcoin or other cryptocurrencies, take time to find an exchange platform that is well known, regulated to an extent, and is transparent with their numbers. The last thing you want is to have an insolvent exchange and not be able to transact.
Tip 3: Use a safe storage method
If you want to invest you’ll need to decide how you want to store your coins. There are two types of storage, cold storage and online storage. Cold storage is when you take your coins off the computer and store them in a USB device or something not linked to your computer. Online storage would be using a trading platform or online wallets such as Coinbase or Poloniex. This boils back to the idea of not having all of your eggs in one basket.
Tip 4: Have a predetermined investment goal
Investing in Bitcoin or cryptocurrencies, you’ll want to decide what your overall investment goal is. It can be to obtain Bitcoin for spending, or the collecting of Bitcoin to invest and profit from the appreciation. You can utilize various trading tools to assist you in calculating your investment goals.
Tip 5: Analyze the market
The fifth and final tip is analysis. Unlike a stock, there is no fundamental analysis in the form of analyzing a company. Cryptocurrencies are closer to Forex in analysis and investors can benefit well from technical analysis. Unlike mainstream markets, these markets are not littered with algorithm trading and high-frequency trading. Human emotions still play a huge role and should be utilized as such.
Cryptocurrencies are still in the infancy stage in the grand scheme of finance. If you are new, there are still plenty of opportunities to learn and gain exposure to the expanding cryptocurrency market.
Enjoyed reading this article? This article was submitted by a guest author more information on investing can be found here: Guide to Cryptocurrency Investing[Photo credit: M. B. M. on Unsplash]