Read This Before Investing in Any Cryptocurrency

On Mar 30, 2020

In the past few years, Bitcoin and cryptocurrency market get a lot of attention from the investors. Many professional and beginner traders start adding Bitcoin and cryptocurrencies in their portfolio to diversify investments. The cryptocurrency market is mostly compared to stock or forex markets but has many differences that make it a lifetime investment opportunity.

The majority of the cryptocurrencies are unregulated and allow people to trade for goods, services or money without the involvement of any central banks or government. Bitcoin is known as the money of the Internet and can be instantly transferred with very low fees across the world between two parties.

If you are thinking to add Bitcoin and cryptocurrencies in your portfolio but doubt where to start, check this guide to buy your first Bitcoin. Before investing in any cryptocurrencies you should know the market and its nature.

Here are the 6 measures you should read before making your mind to invest in the cryptocurrency market.

Unregulated and Global Market
High Volatility
Diversifying your Portfolio
Trading Volume
Wisely Choose the Cryptocurrency Exchanges for Trading
Don’t Invest More than You can’t Afford to Lose

1 Unregulated and Global Market

Bitcoin is a peer-to-peer network that allows users to send money directly from one party to another all over the world without the involvement of any central bank or Government. On the other hand fiat currencies like USD, JPY, CNY, AUD, and Euro are under the control of the Government and central banks mean they can control the price of these currencies maximum times.

The price of fiat currencies does not fall overnight that gives them the trust of investors and consumers. Bitcoin and cryptocurrency market are not controlled by any central authorities mean the price of the asset is totally in the hand of the buyers and sellers. The Bitcoin market works on demand and supply rule but sometimes some external factors affect the price and the market gains or lose 10-20% just in few hours.

There is no-one to help you if you did something wrong in transactions. If you are using a bank or regulated authority to send transactions then if something wrong with your transactions you can complain about it and the bank will help you. But in case of Bitcoin, the transactions are non-reversible and once a transaction is confirmed the money is gone permanently.

Only you are responsible for your transactions. Investors should keep this in mind before making any investment in Bitcoin or cryptocurrency market.

2 High Volatility

As we have explained above the Bitcoin and cryptocurrency is unregulated. The market is highly volatile as compared to the stock market or forex market. The average volatility of Bitcoin is around 5% means the price will move around 5% either side daily. That means the traders have daily opportunities to make profits that are made in weeks or months in the stock market.

This is also a good thing as you have the opportunity to make fast money. If you are good at chart reading and risk management than the Bitcoin market has a lot of opportunities to make handsome profits. Some new investors may think volatility is bad for the market but the cryptocurrency market is run by the buyers and sellers. There is no one to set the prices or trigger the circuit breaker.

3 Diversifying Your Portfolio

Bitcoin remains the number one cryptocurrency since 2009 but not only available in the market. After the rise of Bitcoin, many developers come up with their own cryptocurrencies and some companies rise with it. At the time of writing, there are more than 5000 cryptocurrencies available in the market but always remember 95% of them are useless and probably scams.

Good investors never take all eggs in one basket means they never invest their whole amount in a single asset. Rather than they prefer to invest in multiple assets to maximize the gains, it doesn’t matter in which direction the market moves. You need to do deep research to find the best cryptocurrencies along with Bitcoin that will rise in the coming years.

New investors think Bitcoin is already increased a lot and owning 1 BTC is not possible for them now. So they choose other coins like Ethereum, XRP, Litecoin or other altcoins available in the market. Diversifying your portfolio is a good practice but don’t over diversify means don’t buy everything in the market. We recommend you to must hold Bitcoin in your Portfolio.

4 Trading Volume

Before investing in any cryptocurrency (not an issue for top 10 cryptocurrencies) you should check the trading volume and available exchanges for that coin. Bitcoin and the top 10 cryptocurrencies are listed on almost every exchange and there is very good liquidity for them.

But if you are looking to invest in other altcoin or a new cryptocurrency you should check the exchanges and trading volume of the coin. We recommend you to only invest an altcoin that is listed on more than 5 big exchanges and has good daily trading volume.

Low trading volume means anyone can dump or pump the coins with a very low amount. You also get problems with buying low trading volume coins. Whereas high trading volume coins price is more stable than others and it is easier to buy big amounts.

5 Wisely Choose the Cryptocurrency Exchange for Trading

The cryptocurrency market is traded online and there is no regulation on it. There are many exchanges available on the Internet that provides cryptocurrency trading. Always do research before choosing any cryptocurrency exchange to trade. Choosing the right exchange will save a lot of fees and also provide you multi-level security.

There are many factors that you should keep in mind before choosing the cryptocurrency exchange such as trading volume, number of coins offered, security levels, trading and withdrawal fees, deposit limits and the customer support of the exchange.

If you are new to the market and looking to buy your first Bitcoin then you should read our full guide on How to Buy Bitcoin.

6 Don’t Invest More than You can’t Afford to Lose

There are always risks in all investment and the Bitcoin market is not immune to it. Sometimes the market play against you and you may lose the amount. The first rule of Investment is: Never invest more than you can’t afford to lose. That means only invest the money that is spare after paying your daily life bills.

The best practice is investing a small fraction of your income every month or week. Always keep in mind that you are not going to a millionaire or billionaire overnight, investment needs patience and commitment.

7 Final Thoughts

The Bitcoin and cryptocurrency market is very new and there are a lot of developments on the way. Always do research before investing in any market. Use hardware wallets to store your funds safe for the long term. Bitcoin is the opportunity of a lifetime.