Prices of cryptocurrencies have risen to unprecedented levels as the craze continues to spread.
One Bitcoin (BTC 0.43%) token costs roughly $45,000, an increase of more than 380% from the same point last year. In the past year, the value of Ethereum (ETH 1.6%) has increased by around 1,600%, while the value of Dogecoin (DOGE 0.96%) has increased by a staggering 19,000%. Although cryptocurrency has the potential to yield high returns, not everyone should put their money there. When you’re ready to jump in headfirst, you’ll know it. If you are into Cryptocurrencies, you may check the Basics of Trading Bitcoin.
- Do not be afraid of taking chances.
Investing in cryptocurrency carries significant risk due to the market’s tremendous volatility. Its price has fallen by around 20% in the previous week alone. Although it has bounced back from previous lows, not all investors are comfortable with its historical volatility. Moreover, investing in bitcoin is quite risky. With crypto, we’re on new ground, and it’s anyone’s guess if it will amount to anything in the long run.
- You’re in a position of safety because of your substantial savings.
Because of the volatility of the cryptocurrency market, prudent investors should set aside a substantial rainy-day fund before any bitcoin purchases. It’s possible that you’d have to liquidate your cryptocurrency holdings if you were hit with a major unexpected bill and didn’t have an emergency fund. Due to the extreme volatility of the cryptocurrency market, you may be forced to sell at the very lowest price possible, locking in your losses. That way, you won’t need to sell any of your crypto if you have to pay for anything out of the blue.
If you’re Considering Your First Cryptocurrency Purchase, 7 Important Facts to Keep in Mind
- Never risk more than you can lose
Cryptocurrency is a very high-risk asset. The only uncertainty is a sure thing. It’s also often uncontrolled. Cryptocurrency values fluctuate significantly from one minute to the next. Although the market is now enjoying a bull run, it has previously gone through painful and drawn-out corrections and will almost definitely do so again.
- Perform in-depth analysis
Spend many hours learning about the technology behind digital currencies before putting down serious cash. Your claim that “someone else will purchase it from you for a greater price” is not a value proposition. Prowl online developer and user forums in an invisible manner. Take in some podcasts. Borrow library books not only on digital currency but also on encryption, game theory, and economics to round out your education.
- Don’t give in to FOMO
The only thing you won’t lose out on if you invest because you don’t want to miss out is your money. The problem is that you are responding emotionally to a topic that requires more thinking and investigation than you are currently giving it.
- Usually, something too wonderful to be true is.
There are plenty of swindlers in the crypto industry, just like on Wall Street, Washington, and the American Bar Association. There is no shortage of competitors claiming they have the solution that would finally put bitcoin in its place. Research is the only method to get the answers you need. Be wary as a buyer but also as a borrower.
- Never take someone at their word; instead, double-check everything.
This past weekend, several Twitter crooks used Elon Musk’s participation on Saturday Night Live to trick people into giving them over $100,000 worth of cryptocurrency they didn’t have.
- Watch out for unit bias
A coin’s price of $1 does not make it “cheaper” than Bitcoin’s current market value of $58,000. Different coins have different values. There are dozens of different cryptocurrencies, some of which try to mimic Bitcoin and others that aim to address different problems. The degree of decentralization and assistance from developers varies widely amongst them.
- Neither your keys nor your money
Like cash or gold, whoever has a cryptocurrency is deemed the legal owner of that item. Exchanges and third parties dealing in digital currency are sometimes unregulated and hence vulnerable to hacks and exit scams (client funds being stolen), advanced users will tell you to keep your cryptographic keys to your digital currency wallet safe.
The value of learning to manage money wisely cannot be overstated, and there are many opportunities to put money to good use in one’s life. On the other hand, knowing your limits as an investor is essential. Is your tolerance for uncertainty high? To what extent do you anticipate price volatility?