There’s no such thing as a safe investment. But some investments make less sense than others, and that’s especially true when it comes to cryptocurrency. It seems like every day a new ICO or currency is getting hyped up on the web, and sometimes your excitement can get you into trouble if you’re not cautious about what you’re doing.
I’m here to help you avoid mistakes with cryptocurrency so that you can maximize your profits. The trouble is, most people are looking for overnight millionaires and not thinking about what’s safe. You’ll see this time and time again, where people will go on social media and ask about the best investment opportunity for them without stopping to think critically about just how likely they are to see that kind of success with their money.
What You Need To Know About Investing In CryptoCurrency
1. Market Capitalization Is Critical To Your Profitability
It’s easy to look at cryptocurrencies, see all the money that everyone is making with them, and that becomes your primary focus. That’s not a good thing because you can end up ignoring market capitalization when it comes to investing in any kind of cryptocurrency landscape.
This essentially means how much money there is in the world invested into a particular currency or token. Those with many millions of dollars will drive up the price and make it difficult for smaller investors to get involved without feeling like they’re taking on more risk than they’re comfortable with.
A big reason why bitcoin has seen such incredible growth over time (compared to other currencies) is because of its astronomical market cap. It’s nearly impossible to compete with that kind of money, which means that success is still possible, but more difficult than it would be if you were dealing with a smaller market cap.
2. The Idea Of A “Fair Market” Is Meaningless When You Consider All The Manipulation
For years now people have suggested that cryptocurrency has become the new form of manipulating the market for personal gain. This isn’t far from the truth when you consider how much activity goes on behind closed doors in terms of what exchanges are doing, and how much control miners have over price fluctuations when it comes to ICOs they create or support.
Never think for a single minute that markets are fair, even in fiat currency investments where you expect there to at least be some kind of regulation. With the way that cryptocurrency is designed, all it takes is money to play around with price fluctuations and keep people in a certain currency or coin long enough to make or break their investment.
3. I’ll Repeat It: Never Invest More Than You Can Afford To Lose
People are always trying to tell you about how they got lucky when it comes to crypto investments because they only spent fifty bucks on something that ended up being worth thousands.
There are even stories out there about how someone bought five bucks’ worth of bitcoins years ago without knowing what they were getting into, but when bitcoin’s value started rising rapidly this person was able to retire at an early age because of the profits made from bitcoin investments.
That’s a great story, but it doesn’t mean you should expect to get the same outcome when investing your own money in cryptocurrencies. There are no guarantees when it comes to investments, and cryptos make this more obvious than anything else out there because of the rapid changes they go through (changes that can sometimes be difficult to keep up with).
If you want to spend fifty bucks on crypto coin X because everyone is hyping it up, then do what you want. Just understand that there’s no limit to how high the price could go before coming back down again (and if/when it does come back down, don’t expect it to hit bottom where you bought your coins).
I’m not trying to talk you out of investing in cryptocurrencies, but I am suggesting that you need to understand what’s at stake before putting your own money into something like this. If anything, learn from other people’s mistakes and make sure that all of your cryptocurrency investments are small enough where they won’t impact your life (no matter how high the price goes).
4. Be Careful With ICOs!
Initial Coin Offerings (ICOs) are another good way for people to make money with cryptos, but only if you play it smart.
The key here is not to invest more than you can afford to lose because there have been plenty of ICOs that failed miserably after just a short period. projects were scam artists who took people’s money and ran off with it without delivering any kind of product.
There are also ICOs that failed because they simply didn’t raise the amount of money they were looking for, but managed to keep whatever funds they collected (even though these projects could have made something worthwhile).
5. Verify Everything!
It’s your job as someone who wants to invest in crypto coins or tokens to make sure that you’re not getting ripped off before making a purchase. Never take what other people say at face value, even if their claims sound very convincing.
The majority of bitcoin mining takes place in China because of cheap electricity costs there, so whenever you read about a new ASIC miner being released, don’t just believe what the company says. Try to get proof of work being done with this new hardware before you buy.
6. Futures Trading Is Risky!
Futures trading may sound like a good idea when it comes to making money with cryptocurrencies, but it’s risky business in most cases (unless you only want to use it as a way of gauging what could happen in the future; not exactly predicting what will happen).
You never know how much volatility is going to be around until after it happens, and sometimes there are even market manipulation schemes that traders run to make their currencies look like they’re doing better than they are (when compared against other currencies).
I could go on and on about this topic, but suffice it to say that futures trading is a lot riskier than it sounds and you should be very careful about the risks you’re taking with this method (or any other method that involves shorting cryptocurrencies).