What do you need to Know before Investing in Cryptocurrency?

Posted on: December 24, 2018

A lot of investors are getting in on cryptocurrency as it’s becoming increasingly clear that it’s not just a passing fad. It’s also clear that it has potential to be very lucrative — though not without its own risks. Before you invest in any crypto, it’s a good idea to have a goal in mind and know what to expect.

Use your brain, not your gut

No matter your reason, don’t just gamble your money away because you ‘feel’ like it might do well. Have a reason for why you’re investing, how much you’re investing, what you’re investing in, and the timing you’re choosing to make the buy.

Ask yourself ‘why?’

Not many investors ask themselves why they’re investing in cryptocurrency. Most people will say it’s to make money quick, while others will say it’s a future investment in blockchain technology. For some, it might just be out of curiosity. These are already very different reasons that will result in very different strategies and outcomes.

Have a plan

Now that you have a ‘why’, let’s talk about your plan. For short-term gains, it would make sense to buy low and sell high, right? With crypto, there’s a lot more to it than that. You’d need to choose a coin with high liquidity, have a sense of risk management, and rebalance your portfolio every so often. Without a plan, you’re just not going to produce favorable results.

Remember this is uncharted territory

If you have experience trading stocks, don’t assume cryptocurrency trading will be the same thing. Cryptocurrencies are not stock. You can use tools like RSI (relative strength index) and ADX (average directional index), which are certainly helpful, but cryptocurrency is way more volatile and the market tends to be much more emotional than the stock market.

Keeping a level head, carefully planning and executing your plan, and managing risk are all key to properly investing in crypto. Whether or not investing in cryptocurrency is an investment for you as an individual depends on what you think the future will look like for digital currency, and not what the history of cryptocurrency has been.