Investing in cryptocurrencies is considered one of the most controversial ways of earning money. That’s because the news will always present cases where people lost considerable amounts of cryptocurrencies in a short time. The truth is that the crypto market is quite volatile, and it cannot always provide security or certainty that the assets owned will be there forever.
However, if done correctly, crypto investing can become a sustainable source of income in the long run and supply your other earnings. To succeed in crypto investing, you must always be up-to-date with the latest improvements and details on each cryptocurrency. For example, if you want to know what’s the current Ethereum price, you’d need to use trustworthy platforms, such as Binance, to get the latest information. At the same time, you need to be aware of your risk tolerance, but we’ll get more into this later on. Let’s see what the basics of investing in cryptocurrencies are.
Understand how cryptocurrencies work
Everyone says you need to get knowledgeable when investing, but that’s too vague. Learning how cryptocurrencies work also means getting in touch with how the blockchain works and what other cryptocurrencies are there, so you need to broaden your perspective on learning.
Some of the things you need to be familiarized with include the following:
- Blockchain technology. Since most cryptocurrencies rely on blockchain, you need to understand how it works and what’s the program behind it. Blockchain ledger technology is a transparent network where cryptocurrencies can be shared and transferred, but it can also be a social platform where individuals can make anonymous transactions;
- Blockchains are different. Bitcoin, Ethereum and many other cryptocurrencies are backed-up by different blockchains that enhance their features and improve transactions. For example, Bitcoin’s blockchain is designed to act as a store of value, while Ethereum’s is a more complex network sustained by smart contracts;
- Decentralization. The reason why anonymous people can make transactions worldwide without much of a fuss is that these technologies are decentralized networks that are not ruled by a central authority; instead, users help run the blockchain and get rewarded in return for their efforts;
Learn about the risks of crypto investing
Although investing in cryptocurrencies sounds like an easy thing to do, it can be quite risky if you’re not paying attention to the crypto market. The most dangerous situation you’re being exposed to when entering the crypto market is the considerable fluctuation in value.
Cryptocurrencies’ value is not stable because it’s influenced by supply and demand, investor and user sentiments, government regulations (for bigger cryptocurrencies) and media coverage. All these factors contribute to changes in price that you cannot forecast that easily.
However, you can predict when something good or bad is coming, depending on the bullish or bearish factors. When a bull market occurs, the whole economy is flourishing, and prices are going up, but in a bearish market, things tend to go downhill, and you’ll see how prices go down and investors’ sentiments are negative.
One of the least pleasant things when investing in cryptocurrencies is going through FOMO (fear of missing out). When watching the bearish market happen, most investors tend to sell all their assets, fearing that they’ll lose value and their portfolio will also become meaningless. Experts say that when the market crashes, sometimes the best thing is to leave your portfolio aside and just come back when things settle down.
Choose what you will invest in
Choosing which cryptocurrencies are suitable for your needs is essential if you want to make the most out of crypto investing. That’s because thousands of cryptocurrencies are out there, and even if most have common features, not all can provide what you need. For example, if you only need cryptocurrencies for transactions, Bitcoin is the safest choice, but if you want more than that, you may want to try Ethereum. Or, if you want to be sustainably investing in cryptocurrencies, it would be best to research green cryptocurrencies that aim to lower gas emissions that result after the mining process.
It all depends if you want to invest in the long run or just for a shorter period. For example:
- For short-crypto investments, you should check out Algorand, Cardano or Polkadot;
- For long-term investments, look for altcoins such as Ethereum, XRP and MATIC;
Long-term investments are considered safe and better for people who want to earn less money at the moment and more in time. You can make more money quickly, but you need to be prepared for the risks you expose your money to.
Get better at it
Learning and trying to invest in cryptocurrencies isn’t enough. If you want to become a stable investor, you need to get better at doing it by constantly exercising your thinking skills. Crypto investing is like a game where you need to be prepared for anything, anytime, so if you want to ensure your assets are in a good place, you must learn to diversify your portfolio and broaden your perspective on the actual value of a cryptocurrency.
Not all cryptocurrencies have a proven utility; with time, you’ll learn how to perceive this aspect quickly. For example, Dogecoin or Shiba Inu are known for offering very little utility. Still, they have grown over a certain period of time due to media coverage that included Elon Musk’s tweets on his investments. On the other hand, Ethereum’s network is known for providing trading options for NFTs on different marketplaces, and users can also mint them. The platform also offers smart contracts, decentralized applications and a strong community that works to improve the platform.
Investing in cryptocurrencies isn’t as difficult as it seems, but you need practice and patience to succeed. It’s best to start slowly and learn as much as possible about how cryptocurrencies work, how the blockchain facilitates their transactions and what cryptocurrencies are the most useful for your needs. Finally, you need to be true to yourself when it comes to your risk tolerance so that you know how much of your assets you’re willing to lose.
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