The cryptocurrency revolution kicked off when Satoshi Nakamoto created Bitcoins. Since then, there have been a over 1500 different cryptocurrencies created—and the number keeps increasing every year. As the cryptocurrency craze hits fever-pitch, there are a large number of people who have begun to invest in various currencies and expand their investment portfolio. Because Bitcoin is the first cryptocurrency that came out, it’s considered the de facto or original cryptocurrency and all other cryptocurrencies are known as ‘Altcoins’—alternate cryptocurrencies.
It is a wise decision to invest in multiple currencies and to diversify your portfolio because you never know which cryptocurrency is going to boom and will help you make the most profit. However, while attempting to diversify your investments, it must be ensured that you do not invest in currencies which are worthless—or currencies which have been created as a means to scam investors.
While there are 1500 currencies in the markets at the moment, they’re not all equal when it comes to investment value. Many of these currencies are basically fraud-coins which seek investors and then shut down after raising funds. Hence it is critical to invest cautiously.
Let us take a look at some of the best practices and tips that you need to follow before investing in cryptocurrencies:
Tips on Safe Investment in the Cryptocurrency Markets
1. Always Invest in Altcoins Which have a Proven Track Record
Investing in altcoins can be quite risky, especially if it is a new currency. For novice users, it is best advised to invest in altcoins which have been around for some time and have a proven track record in the cryptocurrency markets. Investing in a currency which has been around for 2 years would be safer than investing in one which has been around for a few weeks. For safest returns, it is advised to invest in currencies which feature in the top 100 list of cryptocurrencies by market capitalization. The higher up in the list you go, the safer your investment is likely to be.
2. Historic Analysis and Charts
Historic analysis of data plays a critical role when it comes to the world of cryptocurrencies. Investors who wish to make smarter investments must learn the art of studying historic data and charts which hint at which currencies may be successful in the long run. Based on previous data, it can be easily figured out if the currency has shown certain trends at certain periods of time. Based on the movement over the past and analysis of the data—smarter investments can be made.
3. Invest based on the market cap and not the price
A mistake that many beginners in the crypto-trade tend to make is to look at currencies and judge their performance based on their price and not on their market capitalization—or market cap. Price is a metric which can be used for comparing the performance of the same currency over time—but when it comes to comparing two different currencies, the price does not matter. You must keep in mind that the real measure of any currency’s success in the crypto markets is its market cap and where it stands compared to other cryptocurrencies. Choose a currency to invest in based on market cap rather than price.
4. Research about the currency before investing
Before investing in a cryptocurrency, regardless of its standing in the markets or its market cap, always try and read up about it. Go through the website of the currency, the whitepapers it has shared as well as forums such as Reddit where communities discuss various issues which affect the currency.
Look up the cause that they stand for—why the currency has been created in the first place. Does this currency act as a solution for a real-world problem? Does it have practical, attainable goals? Are the founders people you have heard about? Look up the social media profiles of the founders of the currency—are they really who they claim to be? Are they a popular name in their domain? All these questions need to be answered before you invest in a cryptocurrency to ensure you do not end up investing in a coin created just to con people.
5. Keep a constant eye on your portfolio’s movement
While it is always good to diversify your portfolio, you should also ensure that you keep a constant eye on it. Always know what price the cryptocurrencies you have bought are trading at. Keep a tab on the performance of your currencies and adjust your stop-loss or your targets based on these records. There are a number of apps and programs which you can use to keep track of these price movements—make sure you use them to full effect to help you make a smarter investment.
6. Buy using safe platforms
A final bit of advice would be to always trade cryptocurrencies using known, safe platforms. Sometimes, bigger names may charge higher fees—but paying higher fees is always safer than ending up losing your entire investment in a hack or theft of funds. Exchanges such as Japan’s Coincheck, Italy’s BitGrail and India’s Coinsecure are recent examples of trading platforms being compromised and funds being lost.
Also, don’t forget to keep yourself updated by checking out websites like CryptoGround to get the best cryptocurrency guides and information.