Beginner’s guide to investing in Cryptocurrency
When was the time you went to a party and you were not cornered by a person convincing you to invest in crypto? Although the person cornering you is right and crypto has immense potential, the best way to decide for yourself is to go through all the facts and look at what is suitable for you. Investing in cryptocurrency is little different than investing in gold, shares, or any other market. The nature of the market is different and that is why the methods and strategies used must be modified too.
Crypto trading and investing are often used interchangeably. Even though the result for both is profit, trading refers to the short-term involvement and gains whereas investing involves buying and waiting for the value to multiply. Investing may involve waiting for years for your investment to come to fruition. For example, BTC to INR value would have taken years to reach where it is today. People who held onto their Bitcoins for years gained a lot!
Let us take a look at what you should remember while investing in crypto especially if you’re a beginner.
Difference between the stock market and crypto market
A common misconception is that if you have the know-how of a stock market, then you must know what a crypto market is like. This is only partially true. Even if you get the concepts, there are a few key differences. The main difference between both is the market volatility. The stock market has been around for a long time. This means it is more advanced in terms of infrastructure, regulations, and so on. This has led to the stock market being more stable. The crypto market has been around for only a decade. In the crypto market, it is not surprising to see the rise and fall by a double-digit percentage. However, this rarely happens in the stock market. When you are investing in stocks, you are essentially investing in the company. However, when you are investing in crypto, you are putting your faith in the potential of the technology and that particular blockchain.
When you are considering investing in Cryptocurrency you should remember these things that you may miss out on.
- Risks of investing – Investing is always risky. However, it is riskier with cryptocurrency. Since the market is volatile, the risk is greater. You should only invest how much you can afford to risk. Apart from the volatility, there is also the risk of not being able to liquidate your assets on time. Since the market is open for 24 hours, there is a possibility you might miss out on chances to make profits or unload assets in case of any bad news. The legal risk that investment involves is from the regulatory authorities that may change the laws leading to a ban on crypto.
- Make a plan for yourself – You can chart a course of investment for yourself. That means you need to identify your capacity for risk and make a budget for investing in the crypto that you think will make a difference. When you make a plan for yourself you can clearly define goals, expectations, and it helps you identify cryptocurrencies that you think are best for investment.
- Look at the hard facts – There are many times when certain crypto is “trending” because it was mentioned by a famous personality. However, do not let this overshadow your opinion. Keep your emotions in check and be pragmatic. This allows you to unearth information about cryptocurrencies without any prejudice.
- Diversification of portfolio – When investing your hard-earned money, it is wise to not invest in one crypto only. Diversification of portfolio not only leads to higher gains but also ensures if there is an issue with one blockchain, you don’t end up losing all your funds. Investing in multiple cryptocurrencies also helps you manage the level of risk. For example, if you feel Eth to INR value is right and you invest, then your next investment need not be another Ethereum-based blockchain.
- Trustworthy sources – Whether it is the source of information or an exchange platform, doing a background check and then investing time and money is essential. There are many cases of fraud and there is a lot of wrong information floating around in the market. Whenever you choose an exchange platform, it is important to see the reviews of past users which can guide you to make good choices.
If you are looking for an exchange that will help you, especially if you’re a beginner, then CoinSwitch is one of the best platforms in India. This exchange platform is reliable and you can expect a friendly user experience. Investments can be made easily and you do not have to rely on anyone else. There is a provision of accessing videos and articles that will help you get started on this journey.
The investment made by you should be made with keeping in mind your other financial goals as well. Even though the reward is high, it may take years to get a hefty return on investment.