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Cryptocurrency is well known for its extreme volatility. Despite this, many investors are looking to make profits by investing in it. Cryptocurrencies fall for a while and then rise higher. Experienced Crypto traders have acquired enough knowledge and expertise to predict the rise and fall of crypto for years, but if you’re new and want to invest here are guides on how to invest in cryptocurrency and what you need to watch out for.

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Understand what you want to invest in: Before you invest in any business, stock, shares, or cryptocurrency, there is a need to understand exactly what you are putting your capital in. You must understand cryptocurrencies, how they function, and the new ones being created every day. You also need to understand the investment case for each trade as many cryptocurrencies are not backed by anything at all, neither hard assets nor cash flow just like Stablecoins.

Understand the Risks of Investing in Crypto: Investments are tantamount to risk. Likewise, crypto investments involve risks that can lead to a big return or loss of most (or all) of your money. Cryptocurrency investment is risky because it involves putting money in an asset that fluctuates in value. For example, the cost for a single Bitcoin was as low as $26,826 and as high as $68,991 from February 2021 to February 2022. Scams are another risk to consider as people have been able to develop hacks to steal peoples’ crypto.

Invest what you can afford to lose

Due to the risk associated with Cryptocurrencies, you need to invest money you can afford to lose if your cryptocurrency investments don’t work out well. To further reduce risks, it is prudent to diversify your crypto investments by investing in different types of coins and projects. This way you can spread your capital over different investments.

Choose Where You Want to Invest

Before you buy your first cryptocurrency, you have to decide whether you want to use a centralized or decentralized exchange or wallet. Companies who want to make Profits create centralized exchanges that are easy to use but come with service charges that can affect the value of your coins and may leave them vulnerable to hackers. These companies, like, Coinbase and Gemini, Patricia, Busha, and Lazerpaymake it easy to create an account and invest in any cryptocurrency that the platform supports in your area.

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In general, a centralized exchange is the safest and easiest way to start as the company will hold the cryptocurrency for you and can help you reset your password if you forget it. They may also have insurance or guarantees that can help keep your money safe from hacks. But using a centralized exchange means you don’t have total control over your cryptocurrency, which can be a disadvantage. Decentralized exchange, means you’re the only one that has access to the cryptocurrency and you don’t give up control or have to share your identity with a private company. You also may be able to buy cryptos that aren’t available from centralized exchanges. But there are fewer protections in place. You could lose your wallet or password and no longer be able to access the crypto or wind up buying a cryptocurrency that turns out to be part of a scam. In either case, you may be able to add funds with a bank transfer, debit card, or credit card. The fees for depositing money and each trade can depend on the platform, funding source, and how much you are trading.

Be Mindful of its volatility

The prices of cryptocurrencies fluctuate. The value can drop at any time on nothing more than a rumour. As a new investor without skills or the high-powered algorithms that direct these trades, this can daunting. As a new investor, you can easily get crushed by the volatility. This is mainly because volatility shakes out traders, especially beginners, who get scared.

Cryptocurrencies present interesting and new investment opportunities that may be worth exploring. But you need to consider the risks involved, and learn more about the different cryptocurrencies and crypto projects to find opportunities that interest you and fit your investing style.

Featured Image Source: Corporate Finance Institute
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This article was first published on 6th May 2022


I am an accomplished content creator and recently delved into technical writing. I enjoy using my skills to contribute to the exciting technological advances and create awareness of evolving technological trends in Nigeria.

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