Investing in cryptocurrencies is gaining popularly, especially when one considers the likelihood of making great returns within a short period. In the year 2018, Bitcoin’s value rose from $1000 to $20,000. Other cryptocurrencies such as Ethereum, Ripple, and Verge also registered a high increase in value within a year.
Many investors, consumers, and mainstream media firms have an extreme interest in cryptocurrencies. Although professional advisors tend to invest in high-risk investments with potentially high rewards, the risks linked to cryptocurrency investments stand out from those of other kinds of investments.
Even though many people are interested in cryptocurrencies, the associated regulations around digital currencies are not keeping up. The value of a cryptocurrency can drop within a day if there is a rumor that a particular country will restrict its use.
Cryptocurrency investments can offer a significant return on investment. However, it is vital to take the time to learn about them. Many firms involved in cryptocurrencies can offer substantial profits. Nevertheless, it is critical that you choose the right firm to invest with when you want to Buy Bitcoin or other cryptocurrencies.
The following are the five things you should know when investing in cryptocurrencies.
1. Be responsible
You should treat cryptocurrencies as a high-risk investment due to the volatility associated with them. Therefore, it is advisable to put only 10 to 20 percent of your portfolio into crypto investments. By investing in different cryptocurrencies, you will not lose your entire investment if some of them do not bring any returns.
2. Be realistic
Cryptocurrency enthusiasts often promise very high returns within a relatively short period. Even though some early crypto investors gained returns of as much as 1000%, there is no guarantee that this will occur again. Therefore, you need to be realistic about your cryptocurrency investment.
When investing, it is vital to stick to well-known cryptos like Bitcoin, Lightcoin, and Ether so that you will be confident about the reliability, quality, and resilience of your investment. To mitigate your risk, you can also consider buying cryptos during an initial coin offering since the price is relatively low and may increase in the future.
3. Be vigilant
In the digital currency industry, there are concerns about security and hacks. Therefore, you need to be vigilant by choosing an excellent blockchain firm to manage your investment. Selecting an organization that is devoted to performing due diligence will ensure that your investment remains safe. If you choose to invest on your own, do not share your private keys with anyone. You should also use reputed digital currency wallets and exchanges. Research about the companies responsible for holding the money you will invest.
4. Monitor your gains and losses
People from all over the work buy and sell cryptocurrencies. Many say that capital gains do not apply because crypto is not a “real investment”. In spite of this, tracking your gains and losses is an excellent way to know if your portfolio is doing well or not. As countries begin regulating taxes related to capital gains from cryptos, you want to be able to pay the taxes you owe and avoid getting into problems with the Internal Revenue Service.
5. Timing is key
To profit from cryptocurrency investments, the timing of the market is essential. The world of digital currencies moves fast, and it is known to be highly volatile. Investors may choose to buy a new, hot cryptocurrency and this may cause its value to increase quickly. Digital currencies also tend to follow particular patterns.
Bitcoin usually leads the way among cryptocurrencies. They tend to increase or reduce in value when Bitcoin does the same. News of price manipulation or fraud can significantly affect the value of cryptocurrencies. Therefore, you should learn what is going on in the digital currency industry more broadly.
Cryptocurrencies are one of the investment options that promise high returns. Therefore, you can consider adding them to your portfolio. However, bear in mind that cryptocurrencies are highly speculative. Investing in digital currencies means taking a risk. By researching the cryptos you want to invest in, you will increase the chances of succeeding.