One of the common mistakes investors makes is investing in a market without having a proper knowledge of how things work.
Investing in cryptocurrency like bitcoin, ethereum can be very lucrative however very risky if you jump into it without having a proper due diligence of how the market works.
If you are new to cryptocurrency, and you’re planning to invest or maybe you came across this article as a novice, this guide attempt to explain the basic things you need to know, before you approach cryptocurrency investment.
Overview of the Cryptocurrency Market
Over the past three years, the cryptocurrency market has been experiencing tremendous growth. Day by day the numbers keep increasing. Recently top cryptocurrency exchange Binance announced to have signed up over 40,000 users in its first week of launch in Uganda.
The cryptocurrency market is a young market compared to stocks and forex and is extremely volatile. Prices of cryptocurrency rise and fall at a very fast rate. Taking time to understand some of the basics of how things work in this space can prove helpful and give you an edge knowing which coins to invest.
How to Approach Cryptocurrency Investment
Learn the Basics
This is the first thing you need to do before Investing in cryptocurrency. Often times have seen many people venturing into cryptocurrency investment without caring to learn the basics about how the market works. It’s important to have a good understanding of what the market is all about. Cryptocurrency terms such as bitcoin, blockchain, smart contract, ICOs, stablecoin, and DApps are some of the words you need to understand and how they relate to each other. Furthermore, you need to learn how to open, operate and safeguard a crypto wallet, how to trade on cryptocurrency exchange account amongst others.
Interestingly, there are a large number of articles, YouTube videos, and blockchain books on the web which attempt to explain the concept of cryptocurrency, the underlying technology, how they work and the terminologies listed above.
Do Your Own Research (DYOR)
This aspect is overlooked by many people in the market. It is important to have a proper understanding of what you are investing. Due diligence is an essential part if you serious about investing in cryptocurrency, ensure you research about the coin or token you are about to invest. Coinmarketcap, Reddit (r/Cryptocurrency), bitcointalk forum, are the good online resource you can get started with.
Access Your Financial Situation
Thirdly before investing in cryptocurrency, access your financial situation; while cryptocurrency investment can be attractive, however, it’s not a ‘get rich quick scheme’. The state of how things go on in the market can be very surprising. ‘Never invest what you can’t afford to lose’ It’s a common phrase often used in this space. In fact, you get to see this term on crypto-related websites as a form of disclaimer. Ensure you access your risk appetite. Many people have lost their life savings to cryptocurrency investment due to improper risk management.
The profit margin of cryptocurrency investment outstrips any traditional market. However, crypto space is full of hacks, scams, and phishing attacks. Always be extra careful when dealing with people. Ensure you use 2FA verification on your wallets and exchange account. And finally beware of pump and dump groups, signal groups on telegram who promised to tell which coin you should invest.