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Posted 18th October 2021

What You Need To Know Before Investing In Cryptocurrency

Cryptocurrencies are a two-edged sword that can either harm or make your finances. Before you start investing in cryptocurrency, you need a holistic knowledge of the marketplace.

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What You Need To Know Before Investing In Cryptocurrency
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As cryptocurrencies are becoming increasingly popular, more people see a need to invest in them. Compared to what was obtainable in 2009 when the whitepaper draft of the first digital currency was created, the cryptocurrency market has grown over the years. Today, over 11,000 cryptocurrencies are in circulation, providing numerous investment channels for people.

However, like other forms of investment, you have to exercise care when investing in cryptocurrency. One of the ways to do this is to understand different cryptocurrency prices like Bitcoin price. You are also expected to pay attention to the news to stay updated at all times. Cryptocurrency investment can appear fanciful on the outside, but it takes a lot of attention to detail to make the most of your investment.

Here, we shall be examining some of the main things to know about investing in cryptocurrency to profit from it.

A Financial Plan Has To Be In Place

Many people fail to understand that in the cryptocurrency market, things won’t always go as planned. On days when things feel bullish, there is the propensity to feel like you will never record a loss. However, the cryptocurrency world is a very volatile space, which is evident in the many variations of Bitcoin price over the years. As such, you must put certain financial safeguards in place to keep you on your feet on days things don’t go as planned.

One of the best ways to put in place a financial plan is to diversify your investment. Why buy Bitcoin with debit card when you can consider investing in other coins with good prospects like Dogecoin and Litecoin?

Understand Different Strategies

As against what you might have thought, investing in cryptocurrencies is not a game of chance. Several trading strategies exist that can be engaged to get certain results. Before you buy Bitcoin or any other coins available, ensure you have invested in learning different strategies. Some of these cryptocurrency trading strategies include day trading and night trading.

The day trading strategies explain how you can trade your coin effectively for other coins to profit from it. On the other hand, night trading, which has proven to be more effective, teaches you how to beat the changing cryptocurrency prices at night to avoid a loss.

While you can learn these different trading strategies from experts, the internet is an excellent place to find helpful information that can guide you. You can go on YouTube and watch detailed videos on every crypto trading strategy that exists. After watching these videos, you can open a demo account and practice the strategy before you buy Bitcoin.

Know the Difference between a Bullish and Bearish Pattern

In the cryptocurrency market, when there is a predicted spike in prices, it is said that there is a bullish pattern. In other words, based on certain parameters like trending news, activities of traders, and government regulation, cryptocurrency prices are expected to go up. A recent example was when El-Salvador accepted cryptocurrency as a legal tender. Based on this news, it was predicted that Bitcoin price would surge, which is a bullish pattern.

In contrast, a bearish pattern is a predicted fall in cryptocurrency prices. The same principles that can cause a bullish pattern can also cause a bearish one. As a newbie into the cryptocurrency trade, you should pay attention to these patterns to know the right coin to invest in. However, when relying on bullish and bearish patterns, ensure it comes from a trusted source, preferably an expert.

Do Not Ignore the Volatility of Cryptocurrency

Many people who come into the cryptocurrency market tend to focus more on what they can gain from their investment than what they can lose. The absence of regulations has remained a major reason why cryptocurrencies are highly volatile. Over the years, we have seen how the Bitcoin price has been fluctuating – one minute it goes up, and the next it comes down. A wise Bitcoin trader does not try to look past the volatility of cryptocurrency but has a strategy to survive through it.

Invest an Amount You Are Not Scared To Lose

Finally, new traders must know that a cardinal rule to investing in cryptocurrency is to put in what you are not scared to lose. You are safe when there is a loss and on the better side when there is a gain.

Generally, in investment, there is what is referred to as the 5% rule of investing. Here, you are expected to put only 5% of your earnings or worth into volatile investments. The remaining percentage can be invested in more fixed assets even if they are less profitable.

In conclusion, cryptocurrencies are the future of money, and there is no better way to seize that future than to start investing in them now. However, you must understand different trading strategies, have a financial backup plan in place, and invest what you are not scared to lose. To be on the safer side, you can consider investing as low as only 5% of your earnings on cryptocurrency.

Also, you can consider diversifying your investment portfolio. As such, instead of investing in Bitcoin alone, you can consider investing in many coins simultaneously. That way, a fall in one coin’s value can be augmented by the rise in the value of another coin.

Categories: Finance, News


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