As people have slowly started to accept cryptocurrencies, their position in the portfolio of both retail and institutional investors is strengthening. However, investing in this asset class still remains a risky affair for varied reasons. Despite the surge in investment in the cryptocurrency space, one cannot overlook the fact that these are highly risky and volatile investments. If you’re a crypto enthusiast or crypto investor who is in for a long game, we suggest you follow certain rules of caution to be relatively safer than most.
For example, if you have purchased Dogecoin at a higher valuation, it doesn’t necessarily mean you’ll get huge profits while converting Doge to INR. Hence, to ensure you experience a reasonably smooth trading road in the short and long run, we have curated an ultimate list of tips that is sure to help you navigate the risky waters. The list of suggestions is shared below.
1. Don’t Make FOMO-Induced Investments
If you invest in digital tokens due to peer pressure or the feeling of missing out, you have higher chances of losing whatever wealth you’ve accumulated or profits you’ve earned in the crypto space over the years.
Just checking the price trend of the past few days is not research enough to make profitable crypto trading decisions. The only correct way to invest in cryptocurrencies is by knowing where you’re investing and why. If you’re in for the long term, give time, research well, understand the coins, and then invest.
2. Be Careful While Giving Your Cryptographic Keys
Investors should treat cryptocurrency like gold or cash. It implies whoever holds these assets is presumed to be their rightful owner. Once you’ve lost hold of your cryptocurrency, it’s gone forever. It is why many seasoned crypto investors advise beginners not to trust third-party exchange platforms with their cryptographic keys.
These platforms are not regulated in most places, and they have been largely susceptible to hacks or exit scams. If something like this happens to the digital wallet platform you’ve shared your keys with, your stored cryptocurrency is gone forever.
3. Give Enough Time Researching the Coin You’re Planning to Invest In
Though seemingly cliché advice, one cannot emphasize enough how important it is. If you really want to make profits in the crypto space, you have to be an informed investor. Spend hours upon hours researching and understanding the technology and use cases associated with your shortlisted coins so you know their value propositions and risks well.
You can lurk into crypto subreddits or other forums or communities to gather as much information as you can. Reading books and online resources is another great way to understand the crypto market and the coins you’re planning to invest in. Once you’ve gathered enough knowledge about a digital currency and its underlying technology and use cases, then only should you make your investment decision.
4. Beginners Should Buy a Fraction of a Coin
If you’re just starting and trying to get hold of the space, don’t try to buy one whole coin. It will cost you a lot of money. Start small by owning a fraction of the coin and play around with it to understand the market and related aspects better. For example, Bitcoin is divisible up to eight decimals, so you can own a fraction of Bitcoin even with minimum investment.
You don’t necessarily need to buy one whole Bitcoin. The same goes for other coins. Let’s say you’ve been eyeing Tron for long. Then consider purchasing a fraction of the coin first. You can sell it off at a profit and cash-out by converting Tron to INR or use the same to buy more cryptocurrency. The crux is to scale only when you’re ready and have understood the nuances of the market.
5. Always Verify Offers That Look Too Good to Be True
Many crypto investors have fallen for giveaway scams from blue tick verified handles. Everyone is aware of the giveaway scam wherein hackers got hold of blue tick verified Twitter handles of popular personalities like Elon Musk and asked people to send some cryptocurrency to a wallet address with a promise to return ten times the investment.
Ten times return in a short span looks too good an offer that made people fall for it. Whenever you see offers that look too good to be true, even from social handles you trust, always wait and verify before taking any action.
6. Understand the Tax Consequences
Even though cryptocurrency has not been accepted legally by the government as a financial tender to facilitate transactions, doesn’t mean there are no tax implications attached to cryptocurrencies. If you’re in India, you would know that the government has recently proposed a 30 % tax bracket on profits made from digital currencies. Tax will also be levied if the crypto investor incurs a loss. In such cases, you should be mindful while projecting your finances. It will give you an edge in the long term, and you’ll be able to plan your crypto investments accordingly.
7. Don’t Invest Any More Amount Than You Can Afford to Lose
Sure cryptocurrency has the potential to make anyone rich, but it isn’t a reason to overlook the fact that these currencies are riskier than many other investments. If you ever lost your money to a phishing scam or the exchange that was storing your digital coins vanished overnight, resulting in an exit scam, you cannot approach anyone for help. Even if you don’t experience such scams, the wild price swings may not be nice to you either. The only thing guaranteed in the crypto space is volatility.
Hence always be careful with the amount you invest in cryptocurrency. Never try to go overboard by investing more than you can afford to lose. It is the only way to sail safer in the short and long-term crypto trading journey.
Conclusion
Investors should be comfortable with taking calculated risks, handling volatility, and making informed investment decisions when it comes to cryptocurrency. On top of these three things, we have listed above seven important things crypto investors should do to expect great returns in the long run.
