6 Important Tips for Investing in Cryptocurrency
Many amateur and seasoned investors alike are in two minds about investing in cryptocurrency.
That’s because fortunes have been made through cryptocurrencies but shirts have also been lost! We want to make sure you take your time with investing in cryptocurrency.
This guide will show you how to minimize your risks and maximize your profits with cryptocurrency. We’ll also delve into some of the other advantages of investing in cryptocurrency other than immediate financial gain.
Here are our tips for investing in cryptocurrency:
1. Always Buy Bitcoin
While some cryptocurrency influencers dismiss Bitcoin altogether, most investors see Bitcoin’s value. This goes for both Bitcoin Maximalists and those investors who wish to diversify their portfolios.
Bitcoin is the original cryptocurrency and still has many benefits. Here are a few factors that work in favor of Bitcoin:
- There are only 21 million Bitcoins in circulation
- This helps Bitcoin retain its purchasing power in contrast with fiat currencies
- It’s recognized across the world
- This includes Bitcoin’s status as a legal tender in some countries
- It’s reached the highest price of any cryptocurrency, with $60K being the current record
Bitcoin will always have its place as both an investment asset as well as an alternate form of currency. As a result, you want to make sure you try to accumulate as much Bitcoin as possible.
In our opinion, Bitcoin ATMs remain the best way for investing in Bitcoin. If you’re wondering are Bitcoin ATMs safe, you’ll be pleasantly surprised!
2. Protecting Your Investments
Before you start buying Bitcoin or any other cryptocurrency, you must find a way to protect your investment.
A Bitcoin ATM, as discussed in the previous section, is one of the best ways to protect your cryptocurrency. When you buy crypto from a Bitcoin ATM you’ll receive a small slip of paper.
This slip of paper is your paper wallet. It’ll contain the details of your private key and public key. As long as you don’t share or lose this paper wallet, you’ll keep your crypto investments safe.
Another option is to invest in a hardware wallet. This is a hardware device on which you can store your crypto wallet details. While not impossible to hack, it’s much harder to do so compared to a web wallet.
With paper wallets and hardware wallets, you’re in full control of your cryptocurrency. With web exchanges, you don’t hold all your crypto investments.
Rather, web exchanges work like banks. They hold your cryptocurrency and you can borrow from them at any time. These are the most prone to hacking and government confiscation.
3. Why Are You Buying Crypto?
Now let’s look deeper into why you should buy cryptocurrency. For most investors, cryptocurrencies are a valuable digital asset for selling for a profit in fiat value.
For a smaller, niche group, cryptocurrency is an alternative currency that can rival fiat currencies. This philosophy has attracted a wide range of individuals, from economists to entrepreneurs to politicians!
You want to focus on one purpose when investing in cryptocurrency. Let’s start with the first purpose.
When Bitcoin was first launched in 2010, it sold for $10 per coin. The highest price of Bitcoin is just above $60K per coin. As a result, there are likely countless Bitcoin millionaires who bought at the right time and sold at the right time.
If you believe Bitcoin or other cryptocurrencies will continue to rise in price, then you can opt for this option.
You want to keep an eye on the price charts of various cryptocurrencies. Buy when the price is low and hold until the price reaches a high price to win you a great profit.
If you believe that cryptocurrency is a great alternative to fiat currency, then you should accumulate as much as possible.
Rather than worrying about the cryptocurrency’s fiat value, you want to accumulate as many tokens as possible. This prepares you for spending on cryptocurrency rather than fiat currency.
4. Understanding What Makes Crypto Valuable
Before you buy cryptocurrency, you must understand what makes a particular coin valuable. Ever since Bitcoin became mainstream, there have been numerous attempts to create more cryptocurrencies.
For example, as mentioned under Tip #1, Bitcoin only has 21 million coins. Mining Bitcoin is the procedure to create more Bitcoin, but this procedure will stop once the 21 million coin limit has been reached.
This is valuable as it works as a hedge against inflation. Fiat currencies can get printed on a whim. Since 1971, fiat currencies haven’t been tied to the gold standard.
Central banks have been working to weaken your purchasing power since 1913! Cryptocurrencies that have a set circulation can retain their value during an inflationary period.
Another aspect that makes cryptocurrency valuable is the privacy aspect. As financial privacy declines worldwide, many investors are concerned with increasing government overreach.
Look for cryptocurrencies that offer great privacy features. Monero is a great privacy coin. Bitcoin and Bitcoin Cash aren’t 100% private but don’t reveal the name of the payer or receiver on the blockchain.
Next, you want to look at the practical uses of a cryptocurrency. Bitcoin and Bitcoin Cash have already become alternatives to fiat currency. You can use them to buy almost anything that you would with fiat!
Other cryptocurrencies are used for particular industries or assets. Ethereum is great for software developers to transact with each other. It’s also become the preferred cryptocurrency for investing in NFTs.
Make sure you study each cryptocurrency thoroughly before you buy it. It’s also best to only invest in cryptocurrencies that have been around for at least 3-5 years.
5. Bitcoin Maximalism or Diversifying?
The next consideration is whether you want to stick to only buying Bitcoin or buying altcoins as well.
The former, known as Bitcoin Maximalism, is advocated by many influencers within the cryptocurrency space. This perspective argues that no other cryptocurrency has the same value as Bitcoin. Only Bitcoin matters for investment or for use as a currency.
To learn more about the benefits of Bitcoin you want to follow Dominic Frisby, Layah Heilpern, and Alex Svetski.
Diversifying is also promoted by some cryptocurrency influencers. This viewpoint argues that other cryptocurrencies are great for investments and also offer practical use for niche industries.
To learn more about this perspective, consider following Crypto Tips, Richard Heart, and Vignesh Sundaresan.
You can always change your mind, of course, but when you start investing you want to stick to one perspective. Spend at least 1 year focusing on buying Bitcoin before you jump into other cryptocurrencies.
After this year, you can decide whether you want to continue only buying Bitcoin or if you wish to buy other cryptocurrencies.
You want to keep an eye on the progress of your crypto portfolio at least once per quarter. This helps you decide whether you should keep investing in a particular coin or not.
As a side note, if your portfolio is falling this doesn’t necessarily mean you should sell. Bitcoin, for example, has had several crashes. But even after these crashes it has risen to high prices.
Also, when dealing with altcoins, make sure you watch out for scams. Many altcoins have been made solely for the owner to rake in some fast cash. Take extra precautions when investing in any alternative to Bitcoin.
6. Become Financially Literate
The final tip is to become financially literate so you can make the best decisions when investing in cryptocurrency.
It’s always best to consult a professional financial advisor before making any decisions about buying cryptocurrency. But you must also do your research and take responsibility for your investing decisions.
As you study cryptocurrency and follow different crypto influencers, you’ll soon find one thing in common. You’ll find that they all understand how money works and they have a great understanding of economics.
You want to also study the history of banking, the value of different currencies, and different schools of economics. For cryptocurrency, the Austrian School of Economics is likely best to help you understand this new financial phenomenon.
This might seem unnecessary at first. But you’ll soon find that the crypto space has many investors who lose their fortunes because of a lack of financial discipline.
Anyone who understands the core concepts of finance will develop financial discipline. You’ll make decisions with a calm mind and will be less likely to lose your crypto fortune.
It’s also ideal to network with other cryptocurrency investors. They can detail their experience with you. This will help you learn from their wisdom as well as help them with your own advice.
Those Are Our Tips for Investing in Cryptocurrency
Now you know our tips for investing in cryptocurrency and can begin your investment journey.
Whether buying Bitcoin or buying other cryptocurrencies, these tips can help you minimize your risks and maximize your potential profits. Make sure you always buy at least some Bitcoin no matter what.
You can decide later if you want to focus only on buying Bitcoin or if you wish to branch out to altcoins as well. Use our guidelines to help you understand if a cryptocurrency is valuable.
You can find even more tips for investing in cryptocurrency on our blog.
6 Important Tips for Investing in Cryptocurrency