Cryptocurrency Investment Mistakes To Avoid
Coronavirus pandemic causes a lot of financial turmoil, and now as the vaccines are invented, people are being optimistic for this year and hoping to cover up what they lost last year. Things will slowly back to normal, but amidst all the damages caused, one sector has bucked the trend, and it is projected to reach higher with a faster pace. Yes, you guessed it right! It is the cryptocurrency sector, led by bitcoins.
Last year billionaire investor Paul Tudor Jones, the founder, and chief executive officer of Tudor Investment Corp., said that bitcoin, the controversial digital currency, reminds him of gold in the 1970s, and maybe the best hedge against inflation in the age of coronavirus.
In a market outlook note entitled ‘The Great Monetary Inflation’, he mentioned that, “If I am forced to forecast, my bet is it will be bitcoin.”
If you have money and you are thinking of trying a high-yield but high- risk investment, cryptocurrency is the sector you should put your bet on. But before rushing towards it, you must know that it is a digital asset that is highly volatile, and the chances of earning big or going bust are equal.
To know more, refer to the below link
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Cryptocurrency Investment Mistakes You Should Avoid
1. Investing without knowing
Be it cryptocurrency or any other asset, investing in it before knowing the detail is the most stupid mistake one can make. Before investing even a single penny, you must know what you are going into. You must gather the information about how it works so that you can act wisely in any unfortunate situation.
Before you invest, here are some basic things to know about crypto money:
Though it can be used to purchase things, it is not any kind of metallic coin or paper money. It's completely digital, and it exists only in the digital world or in computers.
You can use it anywhere across different countries and borders. You can easily pay it with other users without exchanging it for local currency.
As there are no central banks or financial institutions involved, you have to keep track of your own crypto money.
You can spend it anonymously. All transactions are recorded, but nobody will get to know your account number unless you tell them. It's encrypted.
Things to know before investing in Bitcoins
Cryptocurrencies have come a long way so much that now it is used not only for investment purposes but also for payment purposes. Bitcoins are the most popular cryptocurrency, and in 2017, there were around 2.9 to 5.8 million users using cryptocurrency wallets, and most of them were using bitcoin. Nowadays, bitcoin has become a new trend, and people are interested in investing in it as it has its own perks. But, before investing you must know everything about it. So, get to know what it is, how it works, how can you get it, and more.
2. Thinking encryption means security
Yes, you read it correctly. Cryptocurrencies are encrypted, but that is only to make them confidential, and that does not mean it can not be hacked or stolen. These assets are decentralized, so keeping them safe is your sole responsibility.
Here are some tips to keep your investment protected:
Cryptocurrencies are represented by codes or keys. It is like the OTP that you are not supposed to share with anyone. You need to make sure to keep the codes to yourself because once somebody gets the keys, they can use them without your knowledge.
Crypto exchanges have security measures but don't leave your crypto coins in exchanges for long periods, because you may become a favourite target for many hackers.
Choose a digital wallet from a company that you can trust to store your crypto coins in a digital wallet. Before choosing a cryptocurrency wallet company, you must check the features, credibility, performance, and reputation of the company.
3. Not Paying Attention To The Math
Investment is all about making profit potential. As it has been projected that there will be a rise in bitcoins in 2022, you need to keep your eyes on the prize. And how do you do that? Paying attention to the numbers will let you know whether you are making a profit or not.
You need to check transaction fees. Also, as cryptocurrencies can be very volatile there will be multiple changes in the price in a day or even in an hour. So, you need to look at transaction fees if you want to take advantage of these changes.
4. Making Investment Decisions Based on Emotions
There are few acronyms like HODL, FOMO, and FUD which you will encounter often in crypto investing. These acronyms represent some kind of strategy but are emotion-driven at the same time. You must let these emotions drive your investment decisions.
HODL means to hold on to your investment no matter how volatile the market is. But sometimes, you may see that you don't have time to wait for a good return on your investment. That is the time you must cut off your losses.
FOMO or Fear of Missing Out means buying on the hype because you just want to follow the trend. Well, this is the most dangerous one because you would be likely to fly-by-night schemes or scams.
And, FUD stands for Fear, Uncertainty, and Doubt. As clear as it sounds, FUD may prevent you from investing in crypto even if the research stats or market sentiments are in your favour and tell you to invest.
Refer to the below link to know more.
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5. Investing in just one crypto
Bitcoins may be reaching higher multiple folds, but you never know when the market can turn upside down. So, it is wise to invest in more than one crypto as some other currencies like Ethereum and Altcoin might give you good returns. There is an adage in investing, don’t put all your eggs in one basket. Follow that, and do not put all your money in just one crypto.
Do share your views in the comment section.
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