What you need to understand.
If you are considering investing in a cryptocurrency, then there are a few things that you will need to consider and know before you start. Cryptocurrency is definitely becoming more popular, but it is also an area in which many of us are still learning, and it is always good to find out more.
Cryptocurrency is reaching a wider audience than ever now, and the skyrocketing prices are very tempting to newcomers, however, anyone new to cryptocurrency should be aware of the high stakes risks that come with it. Investing is much like gambling, you have no idea if your investment in cryptocurrency will go well or not. This is why we are going to spend time today giving you some top tips to help you get started.
1. Never put in more than you can afford to lose.
As we said, dealing with cryptocurrency is not so far off from gambling. It is riskier than most other investments and nothing is guaranteed other than volatility, and do not forget, it’s unregulated in a majority of cases.
The danger of this currency disappearing varies. Bitcoin which was the original cryptocurrency has been around for more than 10 years and so it is more likely to be stable. This is probably the safest place to start for beginners.
2. Always do your research.
It is a wise move that before you invest in anything you do research. If you were to invest in the stock market you should research to ensure you are making a good choice, this is no different with cryptocurrency. There is no shame in doing extensive research before you invest, you can listen to podcasts, read books on digital currency and cryptography, and if possible go to local meet-ups.
3. “Too good to be true.”
Not dissimilar to Wall Street or the U.S. Congress, crypto is absolutely jam-packed with charlatans. There are so many people who will promise their project will be the one to take over bitcoin, this again means you need to research. Be aware of what you are investing in.
4. Verification before trust.
There are also too many scammers in this market. In the past, some have taken advantage of the media to fraud people out of thousands of dollars of crypto. Always be aware that if something sounds too good to be true, it probably is.
If you feel a little skeptical about opening the cryptocurrency door, remember, you don’t even have to buy a whole coin. Bitcoin is a great way to start, and it is divisible to the eighth decimal, so if you are curious about how this works, you could purchase only $10 worth and have a play around with it before you feel comfortable working with it.
In the U.S. Tax and cryptocurrency is a bigger issue. The IRS considers crypto to be property, not currency, for tax purposes. So if you buy a coin for $1, and it doubles in value, and you spend that extra dollar to buy a chocolate bar, you are required to report that capital gain and pay tax on it. While it is not regulated like stocks or banks, the government does run a massive deficit, and they won’t think twice about asking you about your crypto trades.
7. Trading strategies.
At the beginning of a crypto journey, it will be hectic, and you will get bombarded with ideas for strategies. But, before you go diving into the strategies you hear about online, find one that is simple to use and maintain as you get used to the world of crypto. Start simple, get used to it, then build on it.
Crypto doesn’t have a bedtime, and thus it doesn’t sleep. There are no closing hours, and no holidays, so the constant need to be online is enough to drive you crazy. You do not want to be online all the time just to monitor the market. This is why you need to find a service that will help you to automate your strategy
Constructing a portfolio will reduce risks and provide stability in this market. Rather than just buying a single asset, distribute the risk to a number of assets and manage your portfolio with small adjustments.
10. Patience is a virtue.
We know this is a volatile market, this doesn’t mean that the value of your portfolio will skyrocket overnight. Just let your strategy work and explore the smaller parts of your strategy, learn as you go, and build up expertise. Rome wasn’t built in a day.
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