Guide To Invest In Cryptocurrencies
Cryptocurrency is a new trend and it has taken the whole world by surprise. It has become a paradise for investors and has also started gaining acceptance in many countries and organisations. It has made hundrends of millioniares and its underlying technology is seen as revolutionary in nature. Millions of people, worldwide have invested in it, and the craze is increasing, with the hope that it will yeild good returns. However, people need to understand that there is a lot of volatilty in this world, and it can prove to be a disaster, if not done wisely. So, before you set out to invest your hard earned money in cryptocurrencies, we want you to read this detailed guide to invest in cryptocurrencies.
1. Research About Cryptocurrencies
Whenever, you plan to invest money in cryptocurrencies, make sure you research well. Don’t follow any “so called pro-tips” blindly. Rather dive deep into a bunch of cryptocurrencies, that you intend to invest in. If you are investing in cryptos just because you see every person surrounding you doing so, then it is not investment, it is simply “fear of missing out“.
How To Do Cryptocurrency Research
In order to research well about a cryptocurrency, you will have to understand what cryptocurrencies are and how they work. How price of a cryptocurrency fluctuates and what are the various reasons behind it? What is the target, future plans and road map of a particular cryptocurrency? And, how well does a cryptocurrency go with the masses in general and investors in particular?
Make sure you look at the “circulating supply” and “total supply” of the cryptocurrency. The circulating supply refers to the total number of a particular cryptocurrencies presently in circulation, where as total supply refers to the total amount of cryptocurrencies that will be mined. Example, The total supply of Bitcoins is going to be 21 million, where as, currently, its circulating supply is a little more than 18 million.
These two supplies will give you an idea about whether, a particular cryptocurrency is going to be inflationary or deflationary in nature. example, If a cryptocurrency is unlimited, there are high chances that it’s value will not appreciate. It is because, what is plenty is not valuable.
Another point that you need to consider is “what is the notion of the general masses about a particular cryptocurrency“? You can check it by visiting various forums like reddit.com on daily basis. It will give you an idea, about the public opinion about a particular cryptocurrency. After all, human psychology has a great role in determining price of any good.
Next thing, that you need to look at, is the “source code” of a cryptocurrency. By doing so, you will get an idea about what actually is going in the backend. How many developers are at work and what are the next projects. If the developers are active, it means the coin is probably worth investing in, otherwise not. If one does not have access to the source code of the cryptocurrency, it means all is not going to be well, as transparency is what really matters in crypto-world.
Now comes turn of an important document, called “white paper“. White paper will let you know the motive behind launching any cryptocurrency, the originality, feasibility and driving mechanism of any new project. Any crypto, that has a larger cause to solve, has higher chances of being a popular coin, and therefore, its price is likely to appreciate over time.
Another point, that you need to look at is “the exchanges”, where a particular cryptocurrency is available. If a currency is available at popular exchanges, it is a testimonial of the fact that it is trustworthy. If a cryptocurrency of your interest, is available only at smaller exchanges, then dig a bit further into it. It is not always necessary that any crypto available only at smaller excxhanges, is going to be a fraud, but you need to do a bit of more research.
Now look at the “number of holders” holding a particular cryptocurrency. Lesser the number of holders, more is the volatility associated with a cryptocurrency. If a maximum amount of a currency lies with only few holders, it means it is going to be risky for you, as such big holders can manipulate the price of a cryptocurrency at any time, they want, and you might find yourself at loss. In case of Bitcoin, top 10 holders hold only 5.1% of the total Bitcoins, and in case of Dogecoin, it is a whopping 42.53%.
Another point to check is the “news” surrounding a particular cryptocurrency. Keep yourself updated about the cryptocurrencies of your interest, and if you find them in news, pretty good times, for pretty good reasons, then you are good to go. After all, news manipulates human psychology. Also, follow official social media accounts of cryptos, and you will get to know, what they are upto, and what people have to say about them.
Once you are done with the research, make sure that you perform a “risk to benefit” calculation. If the risks outweigh the benefit and your tolerance capacity, then proceeding ahead will be a disaster.
2. Friendly Platform
Now that you are ready to invest your hard earned money in cryptocurrency, make sure that you do so on a proper platform. Avoid using such platforms that are complicated and driven by crazy rules. Make sure that you invest using such platform that is simple and safe, provides you flexibility to withdraw and invest your money anytime, and has a proper 24 * 7 support system.
Imagine withdrawing your money to book your profit, but your platform not allowing you to do so, because of one or the other rule. It will be a nightmare.
3. Start Small
Start with small amounts of investment and try to learn the about how things are done. Once you are confident, you can increase the amount of your investment.
Remember, that if you start getting sleepless nights after your investment, it means that you are over-invested. Never invest more than what gives you sleepless nights and what is beyond your risk bearing capacity.
4. Diversify your portfolio
Once you are confident that you have started learning the nitty gritty of cryptocurrency investment, make sure that your diversify your investment. Choose a portfolio of cryptos, rather than one, as one should “never put all the eggs in a single basket“. Diversification will help minimise the risks.
5. Prefer Blue Chips
Blue chip cryptocurrencies are those cryptocurrencies that have proven their stability over a period of time. Since they are stable, they are high valued.
Just because any cryptocurrency is available at a cheaper price should not entice you into buying it. They might be extremely volatile and you may have to go through sleepless nights.
Instead go for blue chips. You might not be able to get a good amount of them, but at least you will be sure about the returns.
5. Keep Alerts
Now when you have put your money into the cryptos, and aim at trading, then don’t forget to keep alerts. These alerts will notify you when the value of any of cryptos, whether you have invested in that or not, falls or rises beyond a set value. A timely notification will help you sell and buy cryptos at a proper time, minimise losses and book huge profits.
6. Stay Updated
Keep track of all the cryptocurrencies that you have invested in. It will give you an idea about the volatility associated with each cryptocurrency and help you easily regulate your profits and losses.
Don’t invest and forget. Rather follow the cryptos regularly to know about their behaviour. It will provide you insights into how and under what circumstances does a value fall or rise, and how cryptos affect each other. You will slowly start getting a command over things and emerge as a master of crypto-investment.
These were some steps, that can act as a guide to invest in cryptocurrencies. Don’t simply jump the crypto Bandwagon, just because every one else is doing so. When you have invested, be patient, and don’t let emotions, sentiments and fake advices over power you. Always take stock of the situation and your financial health befor investing.