Things to consider before crypto investing.

Cryptocurrency is gaining traction; lately people are excited about the whole crypto industry. Although the recent crypto crisis somewhat dented the confidence of general investors, it still proved to be a decent investment option. Crypto gives very high returns with equally high risk; novice investors are attracted by the possibility and end up losing their fortunes. In order for losses to be minimal, it is necessary to know the basics and then one can decide whether cryptocurrency is a good investment.

Diversification

Before making any investment, it is advisable to diversify your portfolio across multiple instruments to get long-term returns. When investing in cryptocurrencies, one needs to decide on risk tolerance, financial goals and time frame to decide on the amount to invest in the allocated portfolio.

Reading the White Paper

Proper research is essential; just a hot tip from a friend or just shopping out of Fear-Of-Missing-Out (FOMO) can be harmful. Before investing in any asset, it is highly recommended that you read its white paper to get an idea of ​​its utility, use cases and possible future.

Knowing the team

Understanding the team gives you a better idea, as their track record could ensure the authenticity of the project.

Technical details

After deciding to invest, you have to choose from the many options available for exchanges, wallets, currencies, tokens, etc. Will the investment be made through an ETF or an asset manager, such as a mutual or hedge fund? Will it be a direct purchase of tokens or coins or an indirect investment such as buying shares of companies involved in blockchain technology?

After arranging these details, you know how to invest, but now another question arises, should you invest or not?

There is a big difference between investing and trading. Your investment reasons and goals decide where to go. The main difference is the time frame; trading takes a shorter time, and investing is generally done over a longer period of time. The outcome for both can vary widely, as does the risk involved; trading gives high reward with equally high risk, while investing minimizes risk as well as reward.

Investment vs. Trading

Investing is generally done with a goal in mind, such as a house, tuition, car, or similar, something the investor wants to achieve 5 years from now. Achieving the desired results requires strategic planning.

Trading, on the other hand, is for a lower time frame for short-term goals. Investors trade some amount on an hourly or daily basis, and profits and losses occur accordingly.

It is advised to enter the industry with an investment mindset to gain long-term profits. Also, this market is very volatile and liquidity constraints also play a big role. These limitations dictate faster availability and transactions. And this liquidity is at the end of the exchange.

Newer property

The industry offers a whole range of new means of investment. Each has its own characteristics, so much so that large companies like Ark Invest have a dedicated investment in Bitcoin.

Assortment

It is advisable not to keep all your eggs in one basket. The same is advised here with the added benefit that crypto offers positive diversification effects, precisely against rising inflation around the world.

First move advantage

This sector is relatively new compared to traditional financial instruments and has the potential to offer a wider range of investment opportunities. Over time, the industry will mature and may offer a multitude of options.

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