Now that you have a fundamental understanding of cryptocurrencies, you must determine whether or not to invest. Let me go over the basics of what you should think about in investing to cryptocurrencies as a novice.
Let’s look at why you might be interested in purchasing and trading cryptocurrency.
I highly recommend buying crypto in FTK.COM if you have extra money to trade; you’ll need this extra money because crypto is incredibly volatile, and if you purchase or sell at the wrong time, decentralized money is extremely risky but worth the risk.
Take the time to learn about the different currencies available as well as blockchain technology. There are many accessible primers on blockchain technology created for the layperson. When selecting an investment, read the white paper for the project.
The first thing beginners should do is to buy low and sell high, in order to make any money. So whenever you see a big run up, typically that is not the time to buy, you want to wait for things to cool off before you jump in. Warren Buffet once said that it is wise for investors to be “Fearful when others are greedy, and greedy when others are fearful.
The second option is to stop utilizing leverage; this is a strategy that is best suited to experienced traders. Leverage is the process of investing in bitcoin with borrowed funds that must be repaid. There are two common ways to do this, first is to increase your exposure and second is for shorting. If you believe the price of cryptocurrencies will rise, you will borrow money and instead of purchasing 10 units, you will purchase 100 units, therefore increasing your exposure by tenfold. That is 10 times leverage, and if the price rises, you can make 10 times as much money. Although it appears to be quite appealing, there is a significant flaw, because if the price falls far enough during that period, you risk being liquidated and losing the money you used as collateral for the leverage. That’s how most cryptocurrency exchanges work.
The other very prevalent way people try to exploit leverage is for shorting. They basically believe that the price will drop, so they borrow the cryptocurrency, sell it, wait for the price to drop, then purchase it back, refund the original amount, and profit. This is a sophisticated method, and most beginners will lose money using it. Because they’ll be mistaken about which way the cryptocurrency is going to go, and they’ll be liquidated.
Diversification is the third strategy. This basically says that you shouldn’t put all your eggs in one basket and hope for the best, because you’ll almost never be 100 percent correct, and you should diversify and expect you’ll hedge. To put it another way, there are a few various approaches you can use. The first is inside your cryptocurrency investing portfolio itself; rather than buying one cryptocurrency and being 100 percent certain that you’re correct, you might want to acquire others. Because they might outperform your preferred option, that one lesser risk is a hedge.
Another method to diversify is to invest in something other than cryptocurrencies.
Last but not the least, do not buy more than you can afford to lose, if you’re new to cryptocurrency, you’ll almost certainly lose money. It’s really hard to make a life-changing amount of money with cryptocurrency without putting in a significant amount that makes you sick to your stomach when you watch it go up and go down. You really need to find that fine line of something that makes you feel like you’ve really put something in, but also not so much that if you lost it, it would ruin your life.
Cryptocurrency have made so many millionaires but you also have to realize that a lot of people have lost money on crypto as well.