Buying cryptocurrency is currently one of the most popular long-term and short-term investments. However, suppose you are a beginner who wants to invest and trade cryptocurrency. In that case, you need to be careful, as you will come across numerous things that you have never heard of before, and they can easily overwhelm you.
Before you purchase bitcoin with Cointree or any other crypto coin from any exchange, it's essential to understand how cryptocurrency works. This article has six tips for beginners, to help them understand cryptocurrency before investing. Let's take a look at them.
1. Understand the underlying technology of cryptocurrency - Blockchain
Before you start buying any crypto coin, it's important to understand blockchain, the cryptocurrency’s underlying technology. However, you don't have to go deeper into its technicalities; try to read more about how blockchain works and how it has revolutionised the way people make transactions today.
You can read various articles from crypto experts, online forums or watch some of the many videos that discuss blockchain. Once you start reading more about it, you'll understand why big corporations and governments are exploring different avenues to integrate blockchain to improve their existing systems. You will also understand why banks are petrified of blockchain and cryptocurrencies and why they think it affects their growth.
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Once you know how revolutionary the blockchain is, it will broaden your horizons and open up your mind to new possibilities. In addition, it will give you insight into the world of crypto and help you make better investment decisions.
2. Invest only if can bear the potential losses
Before you go on and invest all of your life savings into crypto, it's essential to understand that the cryptocurrency market can be highly volatile. On top of that, market sentiments, hype, and even a single tweet from an influential individual can fuel this volatility.
That's why it's crucial to understand the rule of thumb while investing in crypto: Only invest what you can afford to lose. You have to be mentally prepared to let it go in times of loss.
This is what makes cryptocurrency highly risky, but it can also make you loads of money if you know what you're doing. As modern finance suggests, higher risks lead to higher rewards. That's why don't go guns blazing in crypto; instead, do your homework, understand it thoroughly, and be ready for losses.
3. Invest for the long term
As a crypto investor, you need to understand that cryptocurrency is not a quick money scheme like many must have told you. For many people out there, cryptocurrency is like the "sour grapes,” which they can't have. That's why they condemn it to satisfy their egos and hide their lack of understanding of crypto.
Beginners mustn't pursue short-term gains as they don't have the necessary technical skills and experience to understand market trends and invest accordingly. To be honest, many people who currently trade crypto have no idea about what they are doing, and they blindly start trading, expecting immediate gains.
Instead of following them like sheep, you need to do your research and have patience while investing in crypto.
If you purchase bitcoin with Cointree or any other crypto exchange for that matter, you need to have the patience to HODL. You surely don't want to be that person who had 2000 BTC when it was valued at $0.10, sold it for $0.30, and regretted the decision when BTC reached $8 back in 2011.
If that amount of BTC was hodled, he will have tens of millions today. That's why you should never invest short-term unless you have the right expertise in intra-day trading.
4. Don't put all of your eggs in one basket
This statement is pretty self-explanatory. You should never put all of your money in one crypto coin. Instead, you need to diversify your crypto portfolio across different coins to minimise the risk and improve your chances of getting good returns.
There are more than 1500 crypto coins and tokens you can choose from and make your investment accordingly. Bitcoin (BTC) and Ethereum (ETH) are the largest and oldest cryptocurrency. They represent the base currency of the crypto market. That's why it's best to have a considerable investment in these two coins while also investing substantially in other emerging coins and tokens.
BTC and ETH are more stable and good investment options for beginners. However, you need to spread the rest of your investment into other altcoins, which have the potential to revolutionise their space. Choose the coins with good fundamentals and vision who aspire to solve real-world problems.
5. Follow credible news sources
Many people criticise cryptocurrency and have different opinions about the people who invest in cryptocurrency. Many of those people think it is just a fad that will die eventually. It's okay to have some doubts, but it is wrong to make assumptions and statements without fully understanding anything.
Crypto may be volatile and risky, but you can have terrific potential returns with the right expertise and tools. Crypto challenges the core fundamentals of conventional banks and seeks to change how monetary transactions are done.
That's why many news media try to scare people about cryptocurrency by exaggerating things. However, it’s also essential to stay up-to-date with international news as sometimes it plays a significant role in the value of cryptocurrencies. Therefore, it is important to select news sources that are credible, unbiased, and trustworthy. Try to stick with the facts and stay away from crypto haters to become a successful crypto investor.
6. Choose your crypto wallets carefully
You can save your crypto online or offline with the help of hot and cold wallets. Hot, offline wallets are a better choice for beginners as they are more practical, versatile, and easy to access. On the other hand, cold wallets offer better protection from unauthorised access like hackers. Therefore, you should try both types of wallets and choose one according to your requirement and convenience.
These are six basic tips that will help you in your crypto journey as a beginner. Don't forget to choose an authentic and reliable crypto exchange to buy and sell your crypto coins safely.
Hannah Gilbert is a freelance writer who offers ghostwriting, copywriting, and blogging services. She works closely with B2C and B2B businesses providing digital marketing content that gains social media attention and increases their search engine visibility.