Cryptocurrencies are subject to great debate nowadays. While some top business personalities around the world bill crypto-currencies as futuristic and sustainable, others are widely skeptical and compare them to a fragile bubble waiting to burst.
Rates of major crypto-currencies have soared over recent months. And they have dropped too. For example, the world’s single largest crypto-currency, Bitcoin (BTC), closed at US$ 14, 129 on December 31, 2017.
Barely three months later Bitcoin traded at US$ 8.547 a coin. Similar ups and downs are evident with other crypto-currencies including Ethereum, Altcoin, Ripple, Litecoin, and Cardano, to name a few. Hence, it is prudent to be extra cautious while investing in crypto-currencies.
Should you be interested in trading crypto-currencies, here are some tips and common mistakes you can avoid.
Why Invest in Crypto-Currency?
This is the first question you should be asking. If the reasons are for getting high returns, you should probably forget Cryptocurrencies altogether. There are no guarantees that crypto-currency prices will rise.
Nor are there any buffers should its prices continue to slide, as will be evident from the performance of Bitcoin and other major crypto-currencies. Since crypto-currencies are not regulated like conventional fiat currencies, you are not assured of returns on an investment.
A sudden surge may net you immense profits while unexpected drops could result in heavy losses, depending upon rates that you paid for a crypto-currency. Speculation in crypto-currencies remains fairly low due to these inherent risks.
Invest in Several Crypto-Currencies
Crypto-currencies are expensive. Should you wish to invest, it is advisable to create a portfolio of various cryptos rather than investing merely in one or two that are the most popular. Rates of various crypto-currencies fluctuate regularly.
Hence, if your investment on one crypto drops, you can derive some buffer from others that are rising. Never buy crypto-currencies when rates are on the upswing. These increases are seasonal and can prove misleading- which is evident with Bitcoin.
Instead, study rises and falls during a span of one year to arrive at a median price. Always place an order to buy cryptos at rates below this median price. Thus, whenever a crypto-currency rate drops, you are buying some for your portfolio.
Hence, you need to watch constantly for peaks, drops and market corrections. There are some ways and means to earn free Bitcoin or at least a fraction of Bitcoin called Satoshi. Before leaping at these offers, ensure that the website or scheme is genuine and not a scam.
Place Orders with Exchanges
With crypto-currency exchanges, you can use a system called ‘limit orders’ rather than ‘market orders’ floated by brokers. Limit orders allow you to pay minimal fees while buying cryptos. This is because ‘limit orders’ are based on the price at which you wish to buy a crypto-currency.
Hence, your order may take some time for fulfillment. On average, you pay 0.25 to 0.4 percent fees of the value of transaction on ‘limit orders’ which can surge to 1.5 to 2.0 percent on ‘market orders.’
Place your order for a fixed price when rates of a crypto are on the decline. This ensures you get them at a rate you wish to pay rather than what the market demands. The system allows you to add more coins to a portfolio, though it can take some time.
Choose Long-Term Investments
To strike big with crypto-currencies, stay invested for longer terms. This offers several benefits while building a portfolio with cryptos. Firstly, you get opportunities to buy low at the right entry point and hold without bothering about market corrections and occasional dips.
It also helps to prevent undue panic selling, should prices of a crypto plunge without warning. While you can buy more during severe drops, never sell whatever cryptos you hold.
Instead, retain them for a fixed number of months or years, like any conventional currency term deposit. Crypto markets operate 24x7x365. The longer you hold – the more you can buy at low rates and sell when the market is at peak.
Avoid One-Time Investments
Simply, this means you should not put all your money into buying various cryptos on a specific day or period. Instead, stagger your investment in various crypto-currencies. Look for highs and lows.
Keep enough money to buy when any crypto hits the lowest mark compared with its prices in preceding months. For this, you need to finalize how much you intend to invest in crypto-currencies and draw plan about which crypto would feature in your portfolio.
Never opt for more than 10 different crypto-currencies for your portfolio since managing them gets cumbersome. An ideal crypto portfolio would consist of high, medium and low price coins as well as those emerging on the market and showing promise of good growth.
Beware of Scams
Unfortunately, the crypto-currency world is full of scammers. They pose as legitimate crypto-currency exchanges and brokers or even blockchain miners. Generally, these scams will offer you crypto-currencies at very attractive prices that tempt you to invest.
Similar to other scams, they vanish once you have made payments. Other scammers may ask you to trade Bitcoin for another high-performance crypto. They will offer a large number of one or two crypto-currencies at rates much lower than other legitimate exchanges.
Also, beware of dubious deals that may ask your username, passwords, and other access codes to your online, offline, or hardware crypto-currency wallet. These dealers will defraud you of every crypto-currency accumulated should they gain illegal access. There are no known ways to trace out who has stolen your crypto-currencies.
Use Hardware Crypto Wallets
You can buy excellent hardware wallets to store your crypto-currencies at prices starting from US $70. Look for hardware wallets that offer highest levels of security such as multiple passwords, fingerprint access and other features that can prevent your cryptos from falling into wrong hands.
Hardware wallets also come with an inherent problem: misplacing one or forgetting usernames, password, and other accessible details mean a loss of your investment. Regardless, hardware wallets are much better since you remain protected from illegal access by hackers to online and mobile wallets.
You can connect a hardware wallet to the internet from any location to trade in crypto-currencies. Always buy hardware wallets from reputed vendors to ensure they are not rigged to leak your username and passwords.
For a beginner, it is essential to read every available information about crypto-currencies, right from their evolution to current scenarios in the financial market. Also, ensure that crypto-currencies are legal in your country and trading would not get you into trouble with the law.
As more criminals turn to crypto-currencies to fund their nefarious activities, the crypto trade is losing its fabled anonymity. Indeed, transactions can come under the scanner of law enforcers and tax authorities.
Regardless, with sufficient knowledge of crypto-currencies, some online tutorials, tips, and tricks on investing in these futuristic tender will help you reap rich returns.
Featured Image: DepositPhotos/ dimarik