Cryptocurrency Do’s and Don'ts
By Tyler Williams
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If there is one thing that’s certain in the 21st century, everyone needs multiple streams of income to obtain financial independence. Some people prefer to invest in real estate and index funds. However, the latest strategy to achieve financial freedom is cryptocurrency. Investopedia defines cryptocurrency as a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
There are plenty of people who have rode the waves in the crypto markets. Some sank and some kept swimming. In fact, according to the CNBC Millionaire Survey, nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, as the crypto boom continues to create wealth for young, early adopters. If cryptocurrency is going to be the millennial/Gen Z version of the S&P 500, it would make sense to do some research on it and possibly invest in some Dogecoin, Etherium, or Bitcoin. So let’s dive into 6 do’s and 6 don’ts of cryptocurrency.
The 6 Do’s of Cryptocurrency
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1. Do your Research.
When people talk about cryptocurrency, it influences people to invest the coins that are in conversation, which may lead to misinformation and financial losses. The best practice for investing in cryptocurrency is for each individual to do their own research. According to Trading 101, cryptocurrency is still very much in its early stage. “It’s been around for a while, sure, but the full potential of digital currencies haven’t been maxed out.” So be mindful of volatile crypto trades, they could definitely break the wallet if not careful.
2. Diversify your Crypto Portfolios.
Use The Bitcoin recommends diversifying the crypto portfolios, just like the stock market investments. Diversification of investment portfolios can put any investor in an advantageous position. The old saying goes, “don’t put all of your eggs in one basket”. “By diversifying your investment portfolio, you’ll be reducing your risks. The main one you’ll be avoiding? Volatility. Other risks mostly affect in-development projects, which might fail midway, turn out to be scams, or be forced to close down due to new or uncontemplated regulations.”
3. Be patient and look out for progress while investing in crypto.
Trading 101 says investing in crypto is money that is lost anyway, just like any other investment. For instance, think of it as a money tree seed placed in the soil, the money tree will not grow overnight. Meanwhile, as time progresses, the evolution of the seed will begin to grow and expand.
Before you know it, BOOM! The money tree turns into a foundation of financial security. “Before you even spend on a single coin, understand that your money is lost anyway, up until it’s time for you to cash out. Then you can enjoy your millions!”, says Trading 101.
4. Track your investments.
Use The Bitcoin advises that one should track their investments. Mainly, it is advisable that one does not become obsessive within the process by checking it every minute. There must be some balance. The website suggests the following. “Apps like Blockfolio, Delta and Cryptagon are great at following the market fluctuations and seeing the evolution of your crypto wallet. To get them going, you’ll only need to input the quantity of crypto you own, which currency you’re investing in, the purchase value, and the date of purchase.”
5. Monitor Dips in pricing for Crypto.
Trading 101 also warns that investors should watch out for dips due to its volatile nature, it can change on a dime from a day to a nanosecond. However, the website shares a strategy that will benefit investors. “Simple-minded investors will just buy crypto at the current price while smart investors wait for a dip in the price after a long surge for more profit.”
6. Secure the Bag: Your Crypto Assets.
The final suggestion for cryptocurrency is to secure the crypto assets, “Instead, try to save them on crypto wallets. These are digital platforms that store private and public keys and interact with different blockchains to let you send and receive currencies”, says Use The Bitcoin.
The 6 Don’ts of Cryptocurrency
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1. Don’t be easily swayed by mainstream media reports of Crypto.
Crypto News suggests listening to the mainstream media is not a good idea.
“Mainstream media has claimed that Bitcoin has died over 300 times. At the same time, mainstream media loves to report about bitcoin when the price is skyrocketing as it drives views and clicks from interested investors.”
2. Don’t trade without a trading plan.
NameCoin News states that no one should trade without a trading plan.“Before placing any trade, ask yourself about your goal and how you will complete it. It can take a little time as research is involved. But if you trade without a trading plan, you are just doing gambling”, said this source.
3. Avoid scams while trading.
Scams are everywhere and so are victims of scams. Cryptocurrency is not above it as well, so in order to not be one of the victims, here’s a golden rule to follow.“There are a number of different crypto scams to look out for but when it comes to investment scams, the simple rule ‘if it looks too good to be true, it probably is’ generally holds true”, according to Crypto News.
4. Don’t make emotional decisions.
When one trades with emotions, it brings someone from zero dollars in the wallet to a hole in the wallet as big as a zero.“Trading emotionally is never good, particularly while trading cryptos. Making decisions emotionally can do more harm than good”, says NameCoin News.
5. Don’t join groups that encourage pump-and-dump operations.
Do not join any group that encourages pump-and-dump operations. Get your mind out of the gutter, this is how it operates. According to CNET, Crypto pump-and-dump schemes are designed to take advantage of people while making some big money for scammers. Generally, it involves influencers who receive financial incentives for telling people to buy a certain digital coin just to raise its value. Once the value goes up, the scammers and influencers sell their coins and pocket the profits, while everyone else sees their investments lose value. “It may seem enticing to join these groups/schemes but aside from the fact that these operations are illegal, you will also likely lose out as someone who tries to ride the pump before the dump happens”, says Crypto News.
6. Don’t get greedy.
Finally, don’t get greedy. Greed is one of the seven deadly sins for a reason. NameCoin News says the following: “Greed is the top enemy of every investor; everyone can be too greedy. But it would be best if you controlled it while trading in the crypto market.”
Now that the do’s and don’ts have been covered, the only thing left to do is apply these rules to your crypto investment strategy and who knows? You could be the first zillionaire of cryptocurrency and take over the world or just have a simple life with family, friends, and loved ones by living without financial fear.
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