Cryptocurrency is all the rage these days among investors. However, a few people are skeptical about digital money and its applications since the industry exhibits extreme volatility and can render your investment useless if you do not act on time.
Therefore, everyone must be aware of the associated risks and only then pledge their funds to a crypto coin. If you are a beginner and feeling lost, this article is for you because here, we explain all the tips and things you must know before dipping your feet into the vast ocean of cryptocurrencies.
However, before we begin, you must understand that all the advice is from a general standpoint, and you must tweak it according to your portfolio and requirements.
1. Educate Yourself
Yes, before pledging your funds for anything, you must ensure that you know what you are doing or at least gain a fundamental understanding of the industry and the technology behind it. For those who don’t know, all cryptocurrencies are powered by Blockchain technology. However, their applications vary from the rest, which makes their prices fluctuate on the market.
Please educate yourself on the cryptocurrency that catches your interest and understand what technology it deals in and whether there are any chances of it getting replaced by something better. For instance, anything powered on Ethereum supports smart contracts, which is one of the applications that will see the sunrise every day.
As a result, getting insights from industry experts is crucial to gain an understanding of where you should invest, how much, and for how long. Unless you understand the market and its jargon, you won’t be able to thrive in it for long. And the only way to achieve that is to begin from scratch and start by learning the ABC of cryptocurrencies. For more information on cryptocurrencies, visit https://topiacoin.io/.
2. Understand Copy Trading
Although controversial, copy trading can be a crucial instrument for rookie investors to understand the market. For those who may not know, copy trading is the method by which you duplicate the trades of a seasoned investor (or people who know what they are doing).
Some people call copy trading illegal, but there is no law against it, and you can purchase or duplicate anybody’s trade as long as they are not involved in shady trading. For beginners who understand the market, copying someone else’s trade can be an excellent option.
It will also help you understand the market’s intricacies and what goes on in the minds of people who have made billions out of the volatility. You will also learn when to invest, call your investment out, and how long it will be before your crypto coin reaps benefits.
However, please select someone sensible and don’t go around following the hype. There is a lot of scam in this industry. Therefore, beware of scammers or people who promise to double your wealth overnight.
All this is a hoax, and as a responsible investor and intellectual person, you should not entertain it. Usually, copy traders charge 20% as commission for copying their trades. Therefore, research and choose a person you think has the experience and can suggest you invest wisely.
3. Associated Risks
Before pledging your funds, ensure that you are aware of the associated risks this industry poses. Thanks to the scammers who are endlessly working to steal your funds, several people have lost their hard-earned money. If you decide to go through with your decision to invest, always store your private keys in a cold wallet instead of storing them on the exchange.
Individuals who have been victims of phishing reported that they were sent a link, and the minute they clicked on it, all their transaction details were stolen since the malware hacked into their system. Not just individuals, hackers have taken down entire firewalls of cryptocurrency exchanges, duping companies of hundreds of millions of dollars.
Another risk that everyone must be aware of is volatility. Cryptocurrency markets are subject to extreme volatility. One minute your coin could be touching an all-time high, and the other minute you will see it plummeting to the point that it will wipe out your entire funds. Therefore, if you’re a beginner, we would recommend that you start by investing less and then build up your portfolio or diversify it to hedge your risks.
Another concept we think you must acquaint yourself with is mining. Mining refers to the mechanism of solving complex equations to generate new cryptocurrency coins into the system and execute related transactions.
Every miner is rewarded with the cryptocurrency they are mining once they solve the block assigned to them. However, mining is not as easy as it sounds. You will have to purchase hardware that is robust and will support the endeavor to build a successful mining rig.
The most powerful rigs are powered either by GPUs or ASIC systems. Apart from this, the electricity your computer will consume is exponential. Therefore, weigh the investment against the price of the coin you are mining to calculate the ROI.
5. Risk Management Strategies
Most people enter the world of investing without having any risk management strategies in place. Having robust risk management strategies in place is crucial because it will prevent your funds from getting wiped out entirely if you are a risk-averse person.
Risk management strategies will help you when to exit the industry without suffering from back-breaking losses. For instance, you can choose an exchange platform that allows you to exercise the stop-loss option.
You can set the limit for your stop loss equal to the amount you initially invested. That way, if the cryptocurrency you have invested in tumbles down to an incredibly low amount, you can sell it for your initial investment amount to save yourself from losses.
Now that you are well-versed in all the crucial aspects of crypto, begin trading and build a fortune for yourself and your family.