Use your sanity and follow the basic rules of all investing. Some people have burned their fingers for not following some of the most basic common sense rules that apply to all forms of investing. I have listed the main issues to consider. Here they come.
Number One: Only Invest Discretionary Funds in Cryptocurrencies
The money you use to buy bitcoin, ether, etc. must be money that you can fully afford to lose. Definitely spend money where appropriate. You don’t take your retirement funds to the races or bookies and use it to gamble. Cryptocurrency investments must be treated in the same way. It is extremely volatile. The first rule is to buy cryptocurrencies that you can fully afford to lose using only discretionary spending.
What is discretionary spending money?
It depends on individual priorities and personal circumstances. One person might consider the money set aside for an island vacation a discretionary expense, but someone else might not want to risk that money buying Bitcoin.
Second: Assess the risk
As with any investment, it is important to assess risk. It’s no secret that Bitcoin is volatile, but if you follow the first rule, even if the cryptocurrency market plummets, your financial situation will not change much. Market volatility is not the only risk investors in some countries have to face. China has imposed a blanket ban on all cryptocurrency transactions to stop all cryptocurrency-related activities.
Number Three: Don’t Be Greedy
Greed wins over many investors. They see the value of bitcoin skyrocket and decide to buy more bitcoin with money they shouldn’t be speculating on. Some form of exposure to the cryptocurrency market will add an exciting string to your financial bow, but don’t try to get rich quick by moving all your money into Bitcoin and ignoring other forms of investing.
Spreading your risk helps minimize the risk of losing all your money at once. During the 2008 global financial crisis, some investors lost all their money in a major financial crisis when companies in which they invested their life savings collapsed. They put all their eggs in one basket.
What does this have to do with investing in Bitcoin? Hacking is a danger to Bitcoin, so spreading funds across different platforms reduces the chances of this happening.
Fifth: use different platforms
Hacking is a possibility that could see your cryptocurrency disappear. It is a good idea to invest your cryptocurrencies in different platforms (e.g. Blockchain, Binance, Blockfi). etc. That way, if one of the platforms gets hacked, you won’t lose everything all at once.
Sixth: Find a safe place to store your passwords
This is important because many of these cryptocurrency trading sites only allow you to enter a certain number of wrong passwords before you are permanently locked out of the site.
You don’t want this to happen to you.
In the cryptocurrency market, several things can go wrong, but with careful planning, you can reduce your risk.