Things to know before investing in Crypto

Cryptocurrencies have grown significantly over the past few years. Its lucrative value makes Investors across the world drawn to them.

Unlike stock markets, crypto markets don’t have any regulation, and their value keeps fluctuating. Hence, cryptos are known to be highly volatile.

As advised by a regular investor, if you are okay losing a share of the money, then it’s worth investing in Crypto. Therefore with high chances of profits, one might lose all their money too.

Cryptos aren’t still widely accepted as means of payment but are constantly evolving. But as the future is uncertain, it can be considered an alternative future investment.

Here are a few things to consider before investing in Crypto:

• - Do your Research

The Crypto market is filled with multiple coins. Till January 2022, there were more than 8,000 cryptocurrencies in existence, and the numbers are ever-growing.

Hence, do your research. Ask yourself questions like, why do you want to invest in this coin? What is the purpose of your investment? Where all the coins are involved? What’s happening around those coins? Are there better alternatives in the market?

Therefore, before investing, dig deep about the coin and try developing an understanding of the crypto market.

• - Beware of the scammers

The internet is buzzing with crypto hype, and multiple scammers around. If you feel something is too good to be true, then you might be right. As scammers on the internet try to attract investors by providing them offers such as “promising guaranteed returns and a risk-free experience.”

Cryptos are inherently risky. Therefore, it is better not to believe in exaggerated claims and promises..

• - Timing is not important, invest systematically

Unlike stock markets, crypto markets are open 24/7, so you can invest in it at any time. As cryptos are volatile assets they keep on going up and down. Because of that, investors often think timing their investments can get them profits.

Some say "buy the dip" but regular investors advise every dip is not worth buying.

As mentioned by a crypto analyst, dip isn’t natural. More and more people are buying Bitcoin by borrowing money which might be causing the dip. Such positions are called leverage longs - where buyers buy with more money than they have. This can be observed in a metric called the exchange funding rate - which goes up when investors open highly leveraged longs, pushing the price higher.

Therefore, don't' time your purchase, try SIP on Cryptos known as “Crypto Investment Plan”. Just like SIP investors can invest a fixed amount in crypto at regular intervals. Such investment options put investors at ease, and the chances of losses becomes low.

• - Coins or security tokens?

Different investments serve different purposes in crypto. Also, Coins are very different from tokens. The coins are mostly used for purely monetary, or transactional value, tokens are linked to securities and utilities, such as shares, services, and preferential treatment.

Hence, figure out the purpose of your investment, and invest accordingly.

• - Invest in a safe bet

As the Crypto markets are filled with multiple coins and tokens it’s important to buy something you can be sure about. 

Before investing, analyze coins on white paper- a document that has all legitimate coins, along with a detailed outline of its principles, purposes, and technology.

The white paper will help you determine whether you should invest in a coin or not. Read the documents carefully. If no data is available regarding a coin, it's a red flag and you should not invest in that.

Investing in the good old Bitcoin can also be a good option. Other coins like Ethereum, are also a good investment option as vast market applications are running on Ethereum these days, along with many more applications building on it.

Therefore, do your research well and try understanding the future market prospects and invest accordingly.

• - Keep the long term in Mind

Majority invest in crypto in hope to become fast riches. Don’t fall into such a trap. Successful investors think of a plan for their cryptocurrency assets. You can involve setting a limit order like when your coin hits a certain level it’ll be sold.

Look for crypto exchanges with strong levels of liquidity, an array of crypto assets, resilient security measures, and reliability that will help you in the long run.

• - Don’t invest more than you loose

As cryptocurrencies are risky, keep that in mind and invest accordingly. There are high chances the funds that are invested might take years to regain, or you might gain high profits.

Suppose you are investing Rs 1,500 every month in crypto because if you lose that money it won’t matter to you much, but looking on the brighter side, if those Rs 1,500 becomes Rs 15 Lakhs after 10 years, then those 15 Lakhs will matter to you.

Therefore, whatever extra money you can invest without the fear of losing, invest that in Crypto. If profits occur, well and good, if not, don't regret it.