5 Steps to start investing in cryptocurrency for beginners

Cryptocurrency has, without a doubt, become so famous in recent days and many investors are trying to make big profits by taking advantage of its sharp rise. Popular cryptos like Bitcoin have once again seen mainstream popularity, and the same happened with other popular digital currencies. Experienced traders have been speculating in crypto for many years now, but what if you are just a beginner and trying to get into action in the crypto market?

Here is how you can start investing in cryptocurrency and things you need to watch for.

5 steps for investing in cryptocurrency

First of all, if you are planning to invest in crypto, you need to organize things and get all of your finances in order. That is, having more funds for emergency cases, a manageable level of debt, and ideally a varied investment portfolio. Your crypto investments can become an additional part of your wallet, and hopefully the one that will help you increase your total revenue.

So, watch for the following 5 things as you are starting your journey of investing in Cryptos.

1.            Understand what you’re investing in

As with any other investment, understanding exactly what you are investing in is the first thing you should think about. For example, if you are planning to buy stocks, you should read the prospectus and carefully analyze the companies. Likewise, you need to have a full understanding of each trading assumption when investing in cryptocurrencies as they are literally available in large numbers and work differently and new ones are created every other day.

Actually, several cryptocurrencies aren’t backed by anything at all, either by hard assets or cash flow. As in the example of Bitcoin, where investors depend exclusively on someone paying more for the asset than the price they bought it for. Put simply, investors wait for the market to become more optimistic to sell their currencies and eventually make profitable returns.

Ethereum, Dogecoin, Cardano, and XRP are some of the most popular coins today. So, before deciding to jump into investing in cryptocurrencies, try to understand the potential upside and downside. In case you don’t have any asset or cash flow to back your financial investment, you could end up making no profits.

2.            Remember, the past is past

One of the biggest mistakes newbie investors make is looking to the past when trying to extrapolate the future. Yes, the value of Bitcoin was only a few cents in the past, but now its value is worth much more. However, the main question is “is the value of Bitcoin going to continue to rise in the future, even if it is not at such a high rate?”

Investors look forward to the future of the asset, not what it has achieved in the past. Buying a cryptocurrency that promises to make money tomorrow is what will give you future returns.

3.            Watch that volatility

Cryptocurrency prices are as volatile as an asset can be. They could suddenly and sharply decline in a matter of seconds and end up being just a baseless rumor. This can be ideal for experienced investors who can achieve considerable returns by trading in a volatile market. However, for newbie investors, investing in such a market is like jumping on a minefield.

Volatility is like a game for high-powered Wall Street traders, where each of whom tries to excel other wealthy investors. Volatility can easily crush first-time investors.

That is because volatility shakes out investors, especially the beginner ones. In the meantime, skilled investors may step in and buy on with a cheap price. In brief, volatility helps experienced investors “buy low and sell high” while beginner investors “buy high and sell low.”

4.            Manage your risk

If you are a new trader trying to invest in any asset, especially volatile assets like cryptocurrency, for the short term, you need to manage the risks involved in this step. That is, you will need to know the best way to manage risk and develop a process that can help you cut your losses. And this process may differ from one individual to another:

•             Regardless of the price, risk management for long-term investors might not bring the returns they wish for. Rather, the long-term mentality allows investors to stick with one position.

•             On the other hand, risk management for a short-term investor might set strict rules on exactly when to sell their assets. For example, when an investment has fallen by around 10%, then the investor carefully follows the rule they have set so that this relatively small decrease does not subsequently turn into a crushing loss.

As a newbie trader, you should think about allocating some money for trading and then only using a part of it, at least in your first few days of trading. In case a position moves against your plans, you still have enough money in reserve to use for later trades. What you need to understand behind this is that you can’t trade if you don’t have the necessary funds. So keeping money in reserve is like having a bankroll that you can get back to at any time to fund your trading.

Risk management is important, but that comes at some cost. While selling a losing position hurts, you’ll have to do it anyway from time to time, or you will incur much worse losses later on.

5.            Don’t invest more than what you can afford losing

Never think of investing the money you are in need of in speculative assets. If you can’t bear to lose it or lose it all in the worst cases, you will not be able to bear losing it by investing in risky assets like cryptocurrency or other assets that are market-based like stocks or ETFs.

Whether spending your money as a down payment for a house or making an important purchase, you should keep the money that you are really in need of for the upcoming few years in safe accounts so that it’s there when you need it the most. And if you want to gain a sure return, paying off your debt can allow you to earn or save the interest rate you’re paying on the debt. You surely can’t lose there.

Finally, never neglect the security of any exchange or broker you’re using for trading. While you may own the assets legally, you still have to ensure their security. Moreover, if you think that your cryptocurrency is not properly secured, consider choosing to invest in a crypto wallet to store your coins offline to prevent hackers from stealing your holding.

Bottom line Cryptocurrency is a very risky investment area of the market, and several experienced investors have looked elsewhere to invest their money. However, for newbies who want to get started in crypto trading, the best advice we can give is to start small and only invest the money that you are willing t

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