Crypto trading is definitely not for everyone. It’s like riding a rollercoaster. Seriously, values change in the blink of an eye and are driven not only by something reasonable, but also by hype, speculations and even Elon Musk’s tweets.
However, cryptocurrencies can be a good investment. You can trade crypto if you are willing to take risks and want to get a quick income, or you can buy and hold if you are interested in a slow and steady accumulation of wealth over the years. Crypto is built on a promising technology called blockchain, so according to some financial experts, short-term risks may be worth its long-term potential benefits.
Remember: you should have a solid emergency fund before you invest in anything. Your investments must not keep you from meeting your basic financial responsibilities.
So, you want to enter the world of crypto. Before you do that, it would be good to clarify your goals and expectations. Here are 4 questions you should ask yourself before you buy crypto.
1. What is your reason to buy crypto?
This is your personal financial decision, so start by assessing your situation and determining the goal you want to achieve. Are you interested in it because you see this as a growth opportunity or because you saw a lot of other people do it and post their screenshots and became a victim of FOMO (fear of missing out)?
Whether you are excited by the prospect of profitable investments or the technological component, think about it from a long-term perspective and do not look for quick easy money. Yes, you can get them, but you can lose them even faster.
Before making short trades or buying coins as an investment to hold them for years, you will have to do some serious research and gain some skills to successfully manage your crypto portfolio.
2. Are you ready to take risks?
You should have high risk tolerance if you want to buy or invest in cryptocurrency. Crypto market is young, at least compared to the stock market. The value of various coins can rise and fall drastically by the hour and there’s no guarantee some coins would no’t collapse completely.
You can see a lot of stories about people who got rich with cryptocurrency, but you don’t see the stories of those who lost it all.
The main rules are simple:
- never invest more than you can afford to lose
- do your own research
- be ready to take risks
3. Where do you plan to buy, trade and store cryptocurrency?
You should decide if you want to use a centralized or decentralized exchange to buy and trade crypto. Note that the whole point of crypto is decentralization: your money truly belong to you, but you won’t get the oversight and protections you get with banks. So you have to evaluate and assess different levels of security and insurance offered by different exchanges.
You can use centralized exchange such as Binance and Coinbase, but you’ll have to verify your identity to use it. If you don’t want to do it, use decentralized exchanges such as PancakeSwap, Uniswap, etc.
If you want to store a small amount of crypto, you can transfer your funds from the exchange to a digital wallet such as MetaMask, TrustWallet, etc. If you need additional security for large amounts of money, you can buy a cold offline wallet that is not connected to the Internet and store your funds there.
4. Which coins would you buy?
There are thousands of different cryptocurrencies, and choosing which ones to buy is the main issue of crypto trading.
If you are interested in cryptocurrency primarily as a long-term investment, many investors are betting on maintaining and increasing the value of Bitcoin, since it is the first cryptocurrency in history that has the longest track record of increasing value over time. Many altcoins (anything that is not bitcoin) are also considered a good investment, but you should do your research to make sure that the project that issued the coin is reliable and long-term.
If you want to make short trades, you’ll have to constantly monitor the market situation and follow the news and feed on various social platforms to keep up to date, find new promising coins and adjust your trading strategy. As the saying goes, buy the rumors, sell the news.
We hope this was helpful. Good luck to you in entering the world of crypto!
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