If you just started paying attention to cryptocurrency and are wondering whether to invest, here are five things you need to know before buying.
Even if you’re an old pro, you probably know someone who’s curious because they read it online or overheard a conversation about how the price of some coin is surging and they can get rich quickly trading it. Please share this post with him or her.
Don’t put in more than you can afford to lose
Crypto is riskier than many other investments. Nothing is guaranteed other than volatility. Risk varies in degree. Bitcoin, the original cryptocurrency, has been around for more than a decade and it’s significantly less likely to disappear than most other coins. But it’s not free of risk either. Hence, don’t bet the proverbial farm, or your total savings, on any coin.
Before you invest a significant amount of money in any digital currency, spend hours upon hours researching the technology so you understand the value proposition and the risks. (“Someone else will buy it from you for a higher price” is not a value proposition.)
Read everything you can find on the topic. Google is a fine place to start. Lurk on community forums. Listen to podcasts too.
Resist ‘fear of missing out’
If the only reason you’re investing in something is to avoid missing out, the only thing you won’t miss out on is losing everything. Fear of missing out (FOMO) is a sure way to destroy whatever wealth you may have accumulated over the years. The problem is that it’s a gut reaction to something that should be researched first.
Trading based on your gut will quickly lead to an upset stomach. Know what you’re buying. Really know it. Going on a trading app and seeing a currency is up 30% or so over the past 24 hours isn’t research.
If it sounds too good to be true, it probably is
Much like anything else, crypto is rife with charlatans. There are more than enough people promising their project will be the one to overtake bitcoin. But is it? There’s only one way to find out: Research.
You don’t need to buy a whole coin.
You can buy a fraction of whatever coin you are interested in. Bitcoin, for example, is divisible to the eighth decimal. So if you’re curious about how this stuff works, you can purchase as little as $10 worth and just play around with it.
The purpose of this article is not to scare anyone away from a fascinating and potentially transformational field, but to make sure they come in with eyes wide open. As the sergeant on an old cop show would say, “Let’s be careful out there.”
Written by: Shola Ayeotan