Getting started with Cryptocurrency
Cryptocurrency is an amazing opportunity to make exponential profits. Like any other market, crypto has its own ups and downs. But unlike other common markets like stocks and commodity markets, you are responsible for managing everything. So it’s important to get the basics right because you lose your money when you make mistakes.
Make sure it’s legal
Crypto has been completely outlawed in some countries for various reasons. So make sure it’s legal to trade Cryptocurrencies in your country. It’s not worth breaking the law for profits.
Find exchanges you can trust
There are literally hundreds of exchanges out there. But when you lose money In crypto, there is no way of recovering it. So make sure you choose your exchanges carefully. Before opening an account and depositing money in an exchange, research it. Find out how long the exchange has existed and what sort of security they use. Also, make sure you use two-factor authentication in any exchange you use.
Set up wallets where you control the keys
Exchanges are not wallets. Exchanges facilitate the trade of Cryptocurrencies. It is OK to hold small amounts in an exchange for convenience. But as your portfolio grows, it is not wise to store crypto in an exchange. Remember, you don’t control the keys in any exchange. So if either the exchange or your account gets hacked, you lose all your funds. Learn to set up Cryptocurrency wallets where you control the keys. There’s no way you lose your coins this way since you are in control of your money. Also, look to invest in a hardware wallet like Trezor or Ledger for better security.
Invest what you can afford to lose
The daily movement is unlike any other market. Bitcoin went from $1,000 in January 2017 to a peak of $20,000 in December. But at the time of writing this article, Bitcoin is at around $8,000, losing 60% of its value in just three months. It is these wild swings which make Crypto profitable. But make sure you only invest a small portion of your savings and not more than what you can afford to lose.
Investment should be proportional to your understanding of Crypto
This is the opposite of the previous point. Some investors would want to increase their investments for more profits and that is fine. But your investment should be proportional to your knowledge of crypto. Make sure you understand the risks involved in Crypto before increasing your investments and how everything works in general.
DYOR: Do your own research
The Crypto industry is evolving so fast that it can be overwhelming at times. Every day there’s a new startup claiming to be the new Bitcoin, or promise to give huge returns. Remember, if something is too good to be true, it probably isn’t. It’s OK to take recommendations and news from other sources. But when you’re making a trade, make sure you know everything about it and understand it completely. Do not buy a coin just because you read about it somewhere or because someone told you to.
FOMO, otherwise known as ‘Fear of Missing Out’ is a common mistake those who’re new to crypto commit. Do not make your investments based on fear. Make your investments based on research. Good research never fails.
Follow news and updates closely
The news is an important driving factor for the prices of Crypto. Do not trade only based on the news, but make sure you know everything that’s happening. Crypto-News India is a good place to start for this. Also, if you’ve invested or planning to invest in a particular coin, follow their official blog and updates regularly.
Take profits regularly, do not get greedy
Though some coins have gone up exponentially, that’s not the case all the time. While buying a coin, set a target to sell it based on research and make sure you sell it when it reaches that point. Also, make sure you set a stop-loss on all your trades so that you’re not caught off-guard when a coin crashes.
Diversify your portfolio
Don’t put all eggs in one basket. There are thousands of coins out there. Research them and diversify your portfolio into multiple coins so that you don’t lose everything when one coin crashes.
Track your holdings and trades
As you start diversifying your portfolio, chances are you hold a good chunk of cryptocurrencies on multiple exchanges and wallets. After a point of time, it gets hard to track the coins you hold and their changes. Start using a service to track all your trades and holdings. A google search should point you to multiple mobile and desktop solutions to track your holdings.
Pay the taxes
Profits made on Cryptocurrencies are taxable in most countries. Though the percentage of taxes changes for every country, make sure you pay them every year. Consult a lawyer or an auditor if necessary.