Before You Learn the Principles of Investing in Cryptocurrency, What Exactly Is It?
Traditionally, people put their money in different long-term investments, like bonds, stocks, real estate, savings accounts, certificates of deposit (CD), and mutual funds. mutual funds. However, most people nowadays have opted for an alternative investment in the form of cryptocurrency. In fact, 40% of Americans now own cryptocurrency, which means that millions of people across the United States have made the plunge into newer investments and diversified their portfolios! But, if you’re new to cryptocurrency, you might be a little confused about everything this type of investment entails.
Simply put, cryptocurrency is a digital and encrypted form of currency that uses cryptography to secure transactions. What makes it different from other currencies is that a government or bank doesn’t centralize crypto. There isn’t a single person or group that oversees cryptocurrency, and no one has control over the software that runs the network. While Bitcoin is the most popular form of cryptocurrency, people can also invest in other types of crypto, such as Ethereum, Tether, Binance Coin, and Solana.
People invest in cryptocurrency with the hopes that they’ll earn money from its rise in value. Additionally, cryptocurrencies can offer a high return on investment and the freedom to send funds to anyone without any intrusion. Unlike stocks, you’ll have complete ownership of your crypto assets instead of a fraction of what you invest.
After reading about the different perks of crypto investments, you may now understand why people put money into these assets. If cryptocurrency sounds appealing to you, knowing the principles behind this investment is important. Continue reading to learn the basics of investing in cryptocurrency so you can hopefully become a successful future investor!
What are the Basics of Investing in Cryptocurrency?
It’s worth mentioning that investing in cryptocurrency is a huge financial responsibility. If you’re new to crypto investing, you must acknowledge its principles before putting your money into an asset.
Here are some key basics of investing in cryptocurrency that everyone should know:
1. Establish Clear Investment Goals
Every potential investor should have a clear idea of what they will invest in. Are you interested in putting your money towards Bitcoin or Ethereum? How reliable is one cryptocurrency compared to another? Ensure you study your options carefully and consider the possible outcomes of each cryptocurrency. Additionally, you must decide the dedication you’re willing to put into an investment. If you’re just adding crypto to what you already have, you may not put too much money into those assets. However, if you plan to invest solely in cryptocurrencies, you will have to prepare for the higher risks that come with that investment.
Speaking of risks, you must straighten your finances before investing in crypto. After all, you don’t want to put money into an asset if you’re struggling with debt! If you have different recurring monthly payments, like a no credit check title loan or auto loans, it is important to manage your installments prior to investing.
Once you have an idea of your investment goals, you can begin your journey as a crypto investor. Just make sure you acknowledge the potential risks and study your assets beforehand. If you understand these different factors, you may have a better path to success in the crypto investment world.
2. Secure Your Cryptocurrency When Investing
Unfortunately, cryptocurrencies are susceptible to online theft and fraud. So much so, that 80% of Americans who invested were targeted in crypto and investment scams in 2023. While sometimes it can be easy to detect scams, you can also lose funds if you’re hacked or your transactions don’t fall through. That’s why it’s important to establish safety measures before you invest in cryptocurrency!
A good way to secure your crypto is by using what’s known as a “cold wallet” device. Through that tool, you can store your funds offline, making it immune to different threats that jeopardize your money. You can also use strong passwords and two-factor authentication that’ll make it difficult for hackers to break into your accounts. If you keep your software up-to-date and use a secure internet, you may be less likely to fall victim to theft.
No matter which safety measure you use, it is important to consider your crypto’s security before investing. The more procedures you use to protect your currency, the safer you’ll be when making transactions. However, if you become a victim of a crypto scam, you can visit the Internet Crime Complaint Center on the official FBI website.
3. Stick to Your Budget When Investing
Most people have the misconception that crypto investors have to put a lot of money into an asset. However, several financial experts agree that individuals should only invest up to 1% to 5% of their net worth. If you only have room for a specific amount from your budget, you should stick to that and stay moderate. Since some cryptocurrencies are volatile, you can lose plenty of money when an asset crashes.
It’s worth noting that experienced investors usually take on high-risk investments when they see an opportunity. However, first-time investors should start with a small amount and carefully observe the market, such as tracking the Chainlink price, before committing more funds. Speak with a financial advisor today for guidance on when to expand your investments after your initial run.
4. Handle Any Potential Risks
As you may have read, some cryptocurrencies can be volatile and risky. Although crypto assets have significant returns, they can also have quick and unexpected setbacks. From government regulations to new developments in cryptocurrency, many factors influence the volatility of crypto. Additionally, it’s important to understand how to borrow against bitcoin if you need liquidity, as this can be a way to access funds without selling your assets.
However, managing those risks is possible if you have different plans in motion. For example, you can spread your investments to multiple cryptocurrencies to lessen the threats associated with one asset. If you borrow funds to maximize your returns, you should limit those leverages to avoid significant losses. Additionally, you can consider using a stop-loss order to sell an asset when it marks a predetermined price point. That way, you can keep your cryptocurrencies away from sudden volatility and protect your assets.
Whichever way you choose to handle potential risks, it is important to have your solutions in mind. Of course, you can lose money with an asset, but you can lessen those losses if you implement strategies. Make sure you research every available method online before investing in crypto.
Decide Whether Investing in Cryptocurrency is Right for You
After learning some of the basics of investing in cryptocurrency, you must decide if this business opportunity fits your needs. Like any other investment, cryptocurrency has its ups and downs. However, if you acknowledge and are prepared for the potential drawbacks, you might have a greater chance of succeeding with this investment.
If you want extra help in becoming a future investor, you can always contact a financial advisor for assistance. They can offer different strategies and answer any questions you may have about crypto investing. You may miss out on essential tips if you invest in crypto without consulting an expert.