The cryptocurrency market is very volatile and can confuse new investors. However, the potential for huge returns makes it worth the risk, but there are some rules of investing in crypto you should follow if you want to get involved with it.
Before investing in crypto, all investors should follow a few rules of thumb. First, if you don't know what you are doing, don't do it! You should always research before investing your hard-earned money into any investment vehicle. Finally, when investing in cryptos, only invest what money you can afford to lose if things go wrong or don't go according to plan.
Here are some rules of investing in crypto that investors must follow before they get started:
One of the most important rules of crypto investing is never investing more than you can afford to lose. The crypto market has seen unprecedented growth and just-as-large drops in value. It's still a nascent market without regulatory checks and early-stage technical barriers. This can lead to some unfortunate situations, such as hacks or frauds that might appear to happen on a whim.
Dollar-cost averaging (DCA) is the smartest way of investing to help you build wealth over time. It involves regularly buying shares in a particular investment, regardless of the share price.
The idea behind DCA is that it reduces the problem of purchasing shares at their peak price, which means you're less likely to suffer from buying high and selling low — the two biggest mistakes most investors make.
Using this strategy, you'll be able to purchase more units when prices are low and fewer units when they're high; this helps smooth out returns over time and reduces risk by reducing volatility in your portfolio overall.
The market is volatile, so you should stay up-to-date on news and developments. In addition, you should research cryptocurrencies before investing and ensure they have a real use case. If you invest without proper research, you might lose all your money if there is no longer demand for the coin or token.
The major assets to invest in are Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and Bitcoin Cash (BCH). These are the most stable, have the most liquidity, and have the biggest market caps.
They are also likely less volatile than other coins because they're backed by real-world use cases that people need daily.
You must use a hardware wallet to keep your crypto safe and secure. A hardware wallet is an electronic device that securely stores your private keys. It can send and receive cryptocurrencies through the USB port from your computer or mobile device.
A hardware wallet will offer you an extra layer of protection for your coins because it's not connected to the internet and, therefore, cannot be hacked from afar by hackers who want access to your funds.
Common sense is the best way to approach any investment. When it comes to cryptocurrencies, this should be no different.
Use the rules of investing in crypto as your guide, and stick to them! Research thoroughly before buying any asset and stick with major assets like Bitcoin (BTC) or Ethereum (ETH). Safe storage is also very important; always keep your private keys offline and use hardware wallets.
We hope this blog has helped you understand the crypto investing rules. While it may seem complicated at first, with a little research and patience, anyone can get started!