If you keep up to date with financial news, you may have heard about the recent surge in Bitcoin value. In fact, the recent boom in cryptocurrency has extended far beyond Bitcoin alone. The economic turmoil caused by the COVID-19 pandemic has exposed several notable advantages of cryptocurrency over fiat money. Most importantly, cryptocurrencies are substantially more secure than traditional currency, and are finite, so governments cannot inadvertently devalue the currency by printing more of it. As such, not only is bitcoin itself rising rapidly in price, but both the individual cryptocurrencies themselves, and the blockchain technology behind it, have become very hot investments on the financial markets. Together with other emerging tech such as AI, blockchain and cryptos are expected to rapidly change the global economy.
You understandably may thus be considering investing in cryptocurrency. However, doing so can be a somewhat daunting process if you are new to it. To help you out then, here are a few beginner tips that every crypto trader should know*.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.
Get a Wallet
While cryptocurrency transactions are considered to be very safe and secure, this is not necessarily the case of the platforms where you can buy crypto. Therefore, while you can store your cryptocurrency on these platforms, it is generally not advisable to do so. Before you decide on which cryptos to buy then, you should invest in a reputable crypto wallet. These will allow you to take your cryptocurrency offline, where it is inaccessible to hackers or malicious software. It is thus the safest way to store cryptos. To increase your security, you can even use a cryptocurrency tumbler, which further anonymises your transactions. It is worth noting though that tumblers take a 1-3% cut on your cryptocurrency.
As well as being good advice for investing in general, prospective traders should also strive to invest in a range of different cryptos. It is worth putting at least some of your investment into the well-known higher value cryptos such as Bitcoin (BTC) and Ethereum (ETH), because their size means they offer safer investments than smaller ones. However, because they are now so expensive, it is more difficult to make large profits with them. It is therefore a good idea to also invest in some smaller cryptocurrencies, which have a higher percentage of failing, but offer the chance for massive returns if they do well.
You can even move your crypto investments around based on the current fluctuations of the market. This is because platforms now offer exchange services, where you can trade certain cryptos for others. If you are worried that that the crypto market is weakening, you can even convert cryptos like Bitcoin and Ethereum to cash, to mitigate any losses.
Don’t Become Overexposed
While cryptocurrency offers the chance for potentially huge returns, it is still important to treat it as an investment. Even the best opportunities on the market are far from guarantees. As such, it is important you risk no more than you are prepared to lose, as you would with any other investment. Fortunately, there are plenty of cryptos you can invest in at a very low cost, but still offer potential for serious gains. It is worth noting, though, that the smaller the crypto is, the more likely it is to fail.