If you are thinking of trading and investing in cryptocurrency, you are in good company. This is important because if cryptocurrency loses its luster, its market will shrink, along with your investment. This reality is true for all markets. In stocks, they often say the trend is your friend. If investors and trending towards buying a particular stock, that’s good news if you own it, but beware of indications that the trend is about to reverse.
At this point, the crypto trend is still your friend, so money can be made. It can also be lost though. Just ask the people who bought bitcoin at near $20,000 in December of last year. Those who sold at the top of that market made off like bandits. This should serve as a caution that if you intend to trade and invest in cryptocurrency, you’d best make sure you know what you’re getting into. Here’s some key tips for making money in cryptocurrency.
Understand what it is not.
It is not safe. It is not the place to park your life savings. It is not the path to retirement at 40. Every hot investment, from stocks to real estate to commodities have given rise to the myth that anyone can get rich quick if they just invest all their money right away. A lot of people believed that in September of 1929. And before the stock market crash of 1987 and at the height of the tech stock bubble and real estate crash. Mind, stock and real estate are solid investments. But it’s easy to get carried away. Trading cryptocurrency can make you money, but don’t bet the farm on it. Not everyone who plays wins.
Set your strategy.
Cryptocurrency trader Shaurya Malwa recommends starting by building a base with the two cryptocurrencies that underpin the crypto world, bitcoin and Ethereum. As Malwa says, “Both of them provide different use-cases for the investors, and are essential platforms over which a Token can be built and sold to the public.” Bitcoin provides a way to store and transfer value. Ethereum’s benefit is its smart contract feature, which allows individuals to securely exchange products and services without an intermediary. Blockchain technology makes it impossible to alter the terms of an exchange.
Next, it’s time to acquire worthwhile altcoins. Altcoins are anything other than bitcoin and Ethereum. Malwa warns to avoid any altcoins that provide no benefit. They are probably just hype. Notice that bitcoin and Ethereum each serve a unique need. An altcoin should also serve a unique need and not one already provided by bitcoin.
Ripple XRT serves as an example of an altcoin that provides a unique need. Ripple’s design allows for much faster transactions than bitcoin. This improvement over bitcoin makes Ripple a viable candidate to replace international wire transfers because it’s so much faster. Many financial companies are interested in its technology.
Ripple has a future. Make sure any altcoins you buy also have a future. As with any investment, diversify. Some coins will soar, others will fall. If you pick good ones and invest for the long term, crypto could go a long way toward building your financial future. Just don’t get overexposed.