Bitcoin Crypto Investment: How safe is it?
Over the last few years, cryptocurrency has exploded to fame with its expansive growth. The price of bitcoins went from 1,000 dollars at the beginning of the year to 20,000 dollars by the year-end. This means that it has grown to about 2000 percent!
Though, with cryptocurrency stealing the market fame, the eternal question remains, is it safe to invest your hard-earned money in bitcoins? Let’s find out!
Cryptocurrency: Basic history
It might seem that it’s only recently that cryptocurrency has taken over the digital finance world, the truth is, it has been co-existing with other forms of investment for quite some time now.
Back in the 19780s, the cryptocurrency had come into existence when David Chaum augmented an algorithm that proved to be an ideal and robust foundation where encrypted forms of money could be exchanged seamlessly.
This expanded and built a valid parallel foundation where other forms of digital currencies such as e-gold and digicash could be exchanged. After that, very soon, a creator called “Satoshi Nakamoto” went on to introduce the bitcoin.
It first came into existence in the year 2009, shortly after which cryptocurrencies like Eutherium and Litecoin were introduced.
Tips for new investors in Bitcoin
In case you are planning to indulge in cryptocurrencies, you should know that they happen to be highly volatile and are viable to change their course of action in the blink of an eye. Here are four strategic tips for performing it efficiently if you are still willing to invest and trade.
Compare the cheap ones with the expensive ones and assess their value.
When you happen to be a new investor, it can get quite complicated and tricky for you to measure their respective values and distinguish the cheap ones from the existing ones. You can perform this task quite efficiently once you take a closer look at the cryptocurrency market capitalization.
Remember that the biggest mistake you can commit is to believe the fact that it is worth investing in crypto because it is cheap. In reality, it is the opposite of this belief system. This means that if crypto is cheap, chances are it is not worth investing in. You need to multiply the current coin price with the number of outstanding coins to determine a crypto currency’s market capitalization. This is possible because of the ripple coins’ supply that happens to be over 99 billion.
It would be best if you managed your risks efficiently.
Understand that whenever you invest in the market, there will always be a risk factor involved. By efficiently managing the risk, you will be able to optimize your chances of getting out the ordeal safely and minimize your chances of losing your hard-earned money thanks to the dwindling prices.
In order to manage your risk factor, you need to consider the following things:
- Timing of your investment
- Positioning the size
- Stop losses
- Understanding the market cycles in which you will be investing in.
Remember that your risk factor is directly proportional to the positioning, and timing is of utmost importance. You need to figure out how to gain support, where your resistances are, and a way to utilize the prices involved.
Stop losses tend to be critical when it comes to cryptocurrencies as they are highly volatile and hold the capability to tweak the prices in the blink of an eye. It would be best to remember that you could get stopped out very quickly whenever a large sell order was involved. Hence, you need to ensure that you take a keen look at the required technical levels and place your stops accordingly.
Check your trading fees routinely.
Often, new investors get confused about the trading fees involved in crypto with the ones involved in stocks. In certain circumstances, trading fees can make it hard for you to come out with a profit as it can be dominant.
Though, there is always a silver lining. There are options available that will ensure that you tend to save money in the process. A popular choice for the same amongst beginners happens to be Etoro, as it requires incredibly low fees. Coinbase is another platform that is widely acknowledged as it offers instant buying options and superior liquidity.
In case you happen to be someone who is likely going to trade multiple times every day, you should opt for a trading platform that can efficiently cater to your needs without requiring you to break your bank at every instance.
Be highly alert about new sources.
You need to keep yourself updated with recent happenings though you need to understand that not every piece of news is going to be genuine – some can be highly misleading too!
Several analysts recently noticed during research conducted by ResearchGate that the reaction to prices going down was extreme compared to the response to cryptocurrencies going up. The researchers then concluded that big traders less influenced investors once they trained themselves.
Hence, it would be best if you were careful about what you read and learn regarding the market as it can have a significant influence on your future investments and even lead to overreactions. Train your mind and keep practicing, and with time, you will learn to pick your battles efficiently!
Cryptocurrencies happen to be a new form of investment, and as a lot of things are happening in the world, chances are, they might even propel higher with time. Many factors can come into play when you wonder whether they are a safe investment.
Remember that you should not use crypto as a means to produce multiple sources of income as they are highly volatile in nature. But, they do hold the potential to go higher and help you gain high profits over existential periods of time. The primary purpose is to choose your steps accordingly.