Five key points to consider before investing in Cryptocurrency

 

01) Conduct due diligence on principals and study on white papers 

It is vital to make any investment on crypto-currencies only after a proper due diligence and a study. While some people argue that crypto-currency is a gambling rather than an investment, others make genuine crypto-currency transactions considering the perceived value and the empirical utility of such digital currencies.

Proper study on the related white paper is crucial before making any investment in crypto as this will avoid any misguidance from the community. All legitimate coins will have a white paper which is a detailed outline of principals, purpose and the technology of each coin and it will help you to determine whether you should or should not proceed with the particular crypto investment.

02) Create a proper strategy for crypto trading 

Separating genuine crypto-currency recommendations from scams is not as easy as it seems. According to the recent statistics, scams relating to crypto-currency have been surged up to 7,118 in the first 09 months of 2021 which is 30% up compared to 2020.  Hence, when you are confronted with lot of information about crypto-currency, you may step back from the hype and better look at the project or the platform. Critically analysis on number of users and what problems does it solve may help you to make better investments  and also it is advised to avoid coins that promise the Earth, but nothing tangible has been delivered.                                                                                       

03) Have a diversified crypto portfolio

‘Don’t put all eggs in one basket’. It is advised to invest your money in different types of digital currencies in order to avoid the risk of being over-exposed, considering the high volatility of market prices of crypto-currencies. There are thousands of digital currencies to choose from where a proper market study will direct you towards the most appropriate investments. 

                                   

04) Timely investment is the key

Regardless of the best of intentions, most cryptocurrency investments are driven by emotions which ultimately lead to poorly timed investments and loss of value thereby. When a token starts to moving in the market, the relevant forces tend to conspire to drive.

If you are planning to invest in a token, resist the ‘Fear of Missing Out’ and wait for the blow-off top and price consolidation. Otherwise you should find a solid project that has been trading flat, however with guaranteed yield and you could take profits when the right time arrives. 

05) Investing in selling coins or security tokens? 

A crypto coin is a form of digital currency that is often native to its blockchain with the main purpose of storing value and acts as a medium of exchange. Examples; Bitcoin, Ether and Cardano. Crypto token is built for a decentralized project on an existing blockchain, Examples; Cronos & Uniswap. Coins are very different from the tokens where a coin has a purely monetary and transactional value where tokens are linked to securities and utilities such as shares, services and preferential treatments.  It is important  to   know what you are buying, what  exactly you are expected from the investment and how will you  get there.   

References                                                                                   

Rodgers, T., 2022. Six cryptocurrency tips (and five mistakes to avoid). [online] www.thetimes.co.uk. Available at: <https://www.thetimes.co.uk/money-mentor/article/crypto-tips-mistakes/> [Accessed 27 June 2022].

Haums, M., 2022. 7 Things to Know Before Investing in Cryptocurrencies. [online] www.entrepreneur.com. Available at: <https://www.entrepreneur.com/article/423311> [Accessed 27 June 2022].

Crypto.com. 2022. Crypto Tokens vs Coins — What’s the Difference?. [online] Available at: <https://crypto.com/university/crypto-tokens-vs-coins-difference> [Accessed 27 June 2022].