Be prudent and follow all of the basic investing rules. A few people have suffered burnt fingers as a result of failing to follow some of the most basic common-sense rules that apply to all types of investing. I’ve compiled a list of the most important ones to think about. They’re right here.
1. Only invest discretionary funds in cryptocurrency.
The funds you use to purchase Bitcoin, Ethereum, and other cryptocurrencies must be funds that you can afford to lose completely. It must be money available for discretionary spending. You wouldn’t take your retirement fund to the races or the betting shop and gamble with it. Cryptocurrency investing must be approached in the same manner. It is extremely volatile. The first rule is to only buy cryptocurrency with money you can afford to lose, not with your discretionary spending money.
What is the definition of discretionary spending money?
That is determined by an individual’s priorities and personal circumstances. Someone may consider money set aside for a vacation to the islands to be discretionary spending, but another may not want to risk that money in Bitcoin.
2. Evaluate the risk.
As with any investment, it is critical to evaluate the risk. It is no secret that Bitcoin is volatile, but if you follow Rule #1, you will see little or no change in your financial situation if the cryptocurrency market falls. Market volatility is not the only risk that investors in certain countries face. In order to halt all cryptocurrency-related activities, China imposed a blanket ban on all crypto transactions.
3. Do not become greedy.
A lot of investors are swayed by greed. They see the value of their Bitcoin skyrocket and decide to buy more Bitcoin with money they should not be speculating with. Having some exposure to the cryptocurrency market adds an exciting string to your financial bow, but don’t expect to get rich quickly by directing all of your money to Bitcoin and ignoring other forms of investment.
4. Broaden your horizons.
Spreading your risk reduces the possibility of losing all of your money all at once. Several investors lost all of their money in one major financial hit during the 2008 Global Financial Crisis, when companies in which they had invested their life savings failed. They put all of their eggs in a single basket.
What does this have to do with Bitcoin investing? Hacking is a risk with Bitcoin, so spreading your money across multiple platforms will reduce your chances of this happening.
5. Use a variety of platforms.
Hacking is a possibility that could result in the loss of your cryptocurrency. It is a good idea to spread your cryptocurrency investments across various platforms such as Blockchain, Binance, Blockfi, and so on. If one of these platforms is hacked, you won’t lose everything all at once.
6. Keep your password in a secure location.
This is significant because many of these cryptocurrency trading websites will only allow you a certain number of incorrect passwords before permanently locking you out of the site.
This is not something you want to happen to you.
There are numerous things that can go wrong in the cryptocurrency market, but with careful planning, you can reduce the risks.