There are no risk-free investments. It is impossible to completely avoid toffee, but risks can be managed and minimized. Is it worth buying cryptocurrency in 2023, what to pay attention to so as not to lose too much?
Features of the cryptocurrency market and cryptocurrencies
Spontaneous decisions on the principle: “get into a fight and act according to the situation” is not the best idea for investing in cryptocurrencies. Especially for an absolute beginner, inspired by another story of rapid enrichment. Each such story becomes a sensation and spreads on the Internet at the speed of a forest fire, overgrown with fantastic details.
But few people pay attention to some of the nuances: they are rare, occur with sufficiently trained people and often not as sudden as another legend suggests.
By investing in cryptocurrencies, it is indeed possible to turn $1,000 into $100,000 in a matter of weeks. But the probability of losing everything and more is much higher. The stories of people whose savings were chewed up and swallowed by an indifferent market are not particularly covered and are remembered worse, although there are orders of magnitude more of them.
The price of a coin can suddenly rise by several thousand percent and collapse just as rapidly. A textbook example is Dogecoin. The meme-coin, created as a joke, attracted the attention of Elon Musk. It is possible that he also joked, calling the DOGE his favorite coin.
In January 2021, it was worth about 2 cents, and in May it was already trading at 72 cents. Data on the DOGE to BNB exchange rate for that period could not be found, but logic suggests that it could then reach maximum values. Now the most famous meme-coin is worth about 8 cents. And this is quite a common occurrence in the crypto market.
Is it worth investing in crypto?
The cryptocurrency market is unpredictable. It is still very young. Cryptocurrencies are far from being fully integrated into the real economy; there are a lot of inexperienced and non-professional participants on the market.
Before investing in digital coins, you should be aware of the main risks:
- During the day, the coin can rise and fall in price by tens of percent. Often even several times.
- The price of a coin is often influenced by political events, actions and public statements of famous people and even more unpredictable, sometimes even strange factors.
- If you forget the seed phrase from the crypto wallet, access to the account may be lost forever.
- Operations with cryptocurrencies are irreversible, so you need to be careful when sending coins.
- Hackers can use malware or fake coins to steal your money. We also do not forget about the “good old” financial pyramids and other classic fraudulent schemes.
Here are some tips from The Times Money Mentor to help you invest in cryptocurrencies more safely:
You must have a purpose
If you are focused on earnings in the short term, it makes sense to choose trading, arbitrage trading, staking. For long-term goals, hodling is a “buy and hold” strategy. You can also invest in ISO and stocks of cryptocurrency companies. At the moment, Dogecoin mining pools can only be considered out of sporting interest.
Learn as much as possible about the coin you plan to invest in
Yes, it’s boring, but important. Find out who is on the development team, what is the goal of the project, which reputable investors support it. For example, Bankhaus von der Heydt is launching a euro stablecoin based on the Stellar blockchain. This significantly strengthens the position of the project and gives reason to believe that its XLM coin has a future.
Don’t buy a coin just because it’s cheap
Among more than 22k cryptocurrencies, there are already extinct projects, projects without prospects and frankly fraudulent ones. Pay attention to the age of the project, the price dynamics over the past year, and if you have at least a shadow of doubt, do not invest in a coin.
Limit yourself
Resist the temptation to spend more than you can lose without risking a financial disaster out of the blue. Typically, experts advise investing in crypto no more than 10% of the total investment. Choose 5-7 promising coins to diversify risks.
Do not panic
Do not rush to sell coins when prices are falling. Perhaps this is a temporary or artificially provoked recession and its cause can be eliminated. Do your own research.
Automate purchasing
Such functions are available on some exchanges, in particular on Coinbase. You can set up a monthly purchase of a specific coin for a fixed amount. In this way you will average the costs. This can also be done manually, the main thing is a fixed amount and regularity of actions.
Don’t rely on bots
If there were an ideal algorithm, it would have been known for a long time.
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