Despite the fact about the volatile crypto market; individuals still find it difficult to spot a strategy on how to make a good profit from the market and minimize the risk involved. Meanwhile, a lot of people still seek guidance in investing in cryptocurrency but let’s take a clue on what cryptocurrency means.
Cryptocurrency is a digital asset backed by a technology called “Blockchain technology” with the form of cryptography and it has been decentralized; this means no central authority can control the system.
Bitcoin was the first cryptocurrency which was created by an anonymous group or individual called “Satoshi Nakamoto” in the year 2008 and Bitcoin’s first transaction was recorded in 2009; bitcoin was created to nominate the central authority and give back the power to the people.
However, this article entails a step-by-step guide to investing in cryptocurrency, kindly take a glass of wine and a seat as you read along comfortably.
5 Step For Investing In Cryptocurrency
When it comes to investing in cryptocurrency, one needs to have a doctrine he/she should follow, it is quite unfortunate that people jump into crypto investing without following some proper guide on how to gain from the market and minimize the losses pertained to it; Most newbie who jump into investing without a doctrine always don’t make a profit — instead, they record big loose.
However, here is a comprehensive 5 step guide on how to invest in a cryptocurrency.
1. Understand The Crypto Market
When investing in digital assets(crypto), one needs to understand the volatility of the crypto market, investors should understand that the crypto market is unstable which means that the price changes every second, minute, and every hour.
When investors or individuals understand the crypto market; they can control their emotions towards the market when an asset drop below its buying point, it won’t be like it someone or the cryptosystem cheating them or taking advantage of their capital.
There will always be that experience that the market can move upward/downward to their benefit/profit or against their benefits/profit and this will shape their strategy in the crypto market.
However, a coin/token can move from $1 to $100 and it can also move from $1000 to $10 or even $1 in a day because nobody can predict the market with 100% accuracy for no authority controls the crypto market, it either the bears are more than the bulls or the bulls are more than the bears that determine if the market will go bullish or bearish.
2. Understand The Concept Behind Crypto Currencies
A lot of people go into buying or investing in cryptocurrency without knowing the concept behind cryptocurrency, when investing in any coin, it is always better to know what it is or get some information about the coin.
Like a newbie keep asking top gurus; what coin is best to buy now, what coin will make me ×3 in the next few days, what coin can turn $1 into $1000 e.t.c. this isn’t right, depending on gurus in the crypto market, it is better to do much diligence in making some research about top coins like Bitcoin, Ethereum, Binance Coin, and the rest.
Then read up their Whitepaper where their information and plans on how the project is going to become successful, the features, the purpose of creating it, the founder’s names, the project tokenomic, and its product/use-case, all this are what is inside a crypto project whitepaper.
When you now understand the coin, this will give you the ability to know if it is a good coin with great features/utility or a bad coin that can’t be a good ROI, though a lot of newly listed coins are very promising, some will stop working along with their road map while some will eventually disappear by rug pull.
3. Store your cryptocurrency
Cryptocurrencies are stored in crypto wallets, which are either hot or cold wallets. The hot wallets are connected to the internet, and the cold ones are not. It is a bit complicated and peculiar process. This wallet is not a physical wallet but a software program specially designed to store cryptocurrencies.
It stores the private and public keys that connect the user to the blockchain where one’s cryptocurrencies exist. They do not store the cryptocurrencies as such, but they help you access cryptocurrencies on the blockchain with public and private keys. A user needs both to complete the transaction. They’re called ‘keys’ as they unlock the cryptocurrencies on the blockchain.
There are multiple digital wallets like Desktop Wallets, Online Wallets, Mobile Wallets, and Hardware Wallets. One should choose the wallet based on the balance between security and convenience. Some exchanges offer digital wallets to users.
4. Safeguard your Crypto Wallet
Safeguarding your cryptocurrency is an important aspect. It becomes more noteworthy if you are using cryptocurrency to buy products or you have a hot wallet. So, when the crypto is online, one needs to make sure of its security. Usually, people prefer using a VPN (Virtually Private Network) to ensure secured and encrypted online transactions.
Data encryption means that no one can see any of the users’ online transactions. It is an extra layer of protection that ensures users’ data and crypto purchases are completely anonymous. It makes it harder for others to hack into accounts, especially for users who own a lot of cryptos.
5. Risk Management
This aspect is what most people don’t take seriously while some don’t even know what is risk management and how to take proper risk management that can supersede their loss. Meanwhile, it is quite important and very profitable when having proper risk management. Nevertheless, let’s take a clue on the definition of risk management;
Risk Management is the act of managing your risk towards the market that can either be as a strategy in knowing when to buy when to sell or funds in investing in a particular coin.
This will help in minimizing losses in the market to make more profit from investing in any coin and it also controls emotions towards the crypto market e.g
A long-term investor’s risks management might be never to sell any coin regardless of the price and this mentality will allow the investors to stick with the positions and never to sell.
A short-term investor’s risk management might be selling at a particular set price to make a profit or selling when it is 10% down to avoid huge losses in the market.
Newer investors need to follow these rules or set their risks management strategies to avoid losing more or guilds to know when to take profit when he or she is on profit.
Cryptocurrencies are a long-term play, with their fundamentals and the communities they serve. Their usage is separate and much beyond the access we are aware of so far. Thus, one should not treat them as a get-rich-quick scheme. Investors buying crypto should have their investment horizon and book profits periodically.
Also, one should know that the crypto market is very nascent in comparison to other avenues of investment. So, new tokens will enter the markets, create the buzz, and euphoria will fizzle out. Thus, investors should be aware of such trickster schemes. Book your profits on time.