It seems like new cryptocurrencies are created with great regularity. Some of the coins end up getting hyped up by celebrities or on social media, causing the price of the coins to rise quickly. Often, they have very little underlying value or real-world utility.
2. Be prepared for volatility
That means you shouldn’t invest money that you can’t afford to lose; you can’t panic-sell at the first sign of falling prices. And you shouldn’t rush to buy in just because a coin seems to be trending upward. You need to trust that you have the temperament to stay invested even when the asset’s value rises or falls dramatically.
Even the most well-established cryptocurrencies, such as Bitcoin and Ethereum, are subject to wild fluctuations in price, since that’s the nature of these newer and untested assets. You can’t expect that your investment will be stable when you’re putting money in cryptocurrency. You should be aware that big changes in price during short periods of time are a real possibility. Be prepared for that.
1. Do your research from reputable sources
It’s important to buy a cryptocurrency that isn’t likely to see its value plummet once celebrities have moved on to talking about a new craze. You generally don’t want to rely on what influencers are saying to decide which coins to buy. Instead, you should take the time to learn about the coin for yourself and find out whether it has solid long-term potential. Make sure to research any investments that you’re interested in to be sure that the underlying fundamentals are solid.
3. Understand what you’re investing in
Before buying any coin, you should understand who established it, how and why it was established, what the likelihood of merchants accepting it is, how and why it is supposed to grow in value, and what technology the coins are based on. Don’t buy any coins if you don’t understand exactly how they work and what role they will play within your portfolio.
4. Invest for the long term Finally, investing in cryptocurrencies with the hope of making a short-term profit is just setting yourself up for disaster. Any short-term investments, whether it’s day-trading stocks or virtual coins, may seem like they are paying off for short periods if you get lucky and buy at the perfect moment. But it’s too hard to time purchases and sales precisely since no one can predict the future.
If you only buy cryptocurrencies that you intend to hold for the long term, then it doesn’t matter as much if you buy at a bad time or if the price temporarily goes down. You will have time for the coins to recover and hopefully pay off for you over time. Long-term investing reduces the risks that are inherent in a high-risk asset and thus make it much more likely you’ll be a successful crypto investor. If you’re going to buy virtual coins, committing to follow these four rules should go a long way toward helping you grow your wealth with this investment.