Precautions For Crypto Investment – Undoubtedly, the crypto market is way more volatile than any security market. You must be brave enough to invest in such a market with no certainty and regulatory authority to have an investor-protecting mechanism.
Some projects, team members, and the company behind the project is genuine enough to give you returns. However, some of these projects are just for fraudulent activity.
Financial Objectives of Crypto Investment
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Before even entering into the crypto market, you have to decide the financial goals as to why are you investing in the first place. Goals might be of short-term or long-term investments, expected percentage of returns on investments, and the amount of total investment. Along with these, you should also decide on the individual risk-bearing capacity.
The white paper
There are different options available for different types of investors. You need to analyze the coin in which you are investing your hard-earned money. The only thing that is available to analyze the basis and details about the coin is its “white paper.” Investors should not rely upon everything written on that paper, and this is the first precaution you have to take while selecting a coin, and the investor must also verify the things written on their white paper.
This precaution is required because the white paper is not some document filed with a Government Authority. It is a self-regulatory mechanism developed for the Crypto world in order to justify the purpose of the formation of the Coin.
However, this purpose also got defeated with the advent of Meme Coins. Meme Coins are coins without any specific underlying business model. They just gain their value on the basis of demand & supply and also on the basis of sentiments driving the coins. A fair example would be the latest changes in the price of Shiba Inu after the tweet by Mr. Elon Musk.
Anonymity is the riskiest factor of cryptocurrency. Most of the team members behind the projects are unknown. Investors need to verify whether such a project even exists or not, for how long this project is running, and the company supporting that project. Experienced investors’ advice says that do not experiment with new and emerging coins if you are a new buyer.
Just before some days, we saw the advent, rise, and fall of Crypto based on Squid Game. This explains the nature of Crypto accurately. Crypto was introduced in the market on the basis of a TV show. The price of the coin increased exponentially in just 36 hours, and then after some time, it vanished, leaving a loss of investors with a complete loss of money.
Although, now the regulators have started to be more vigilant about the origination of the coins and their basis, still, there is a long time to go before complete transparency and regulations are in place for investor protection.
Selecting a cryptocurrency exchange is another task. Try to go with those exchanges which belong to your country, not because of patriotism but because they are licensed according to your country’s regulations. Investors can keep themselves updated to know the news’s ground reality, which might become difficult to know of the foreign country.
The credibility and approachability of exchange are more if it is locally operated. Also, it is sometimes difficult to transfer money to exchange abroad through local payment methods.
As such, in the times to come. the Government is going to regulate any inflow or outflow of money to exchanges for Crypto trading. Hence, it is better to invest through local exchanges only.
Also, the regulators will come with a number of regulatory norms governing the exchanges to ensure that the KYC (Know Your Customer) & AML (Anit Money Laundering) requirements are complied with and that the money is routed through all the legal channels only.
Wallets- Heavy or Light
To buy crypto, one has to register in a wallet only through which investors can buy selected coins. There are plenty of options available to create a wallet account. One should be cautious about the genuineness of the platform. If the investment portion is slightly less, then there is no need to spend much of the time on that. But if the amount is significant or going to accumulate high over several years, you must spend some time selecting a wallet. Carefully read their instructions and allocate the space in your PC to install a full wallet.
Also, one has to be careful about the use of wallets and should enable additional security requirements. Because there have been a few cases of theft of Crypto from wallets by a security breach.
The timing of buying a coin is the most critical factor in this speculation business. As we all know that crypto is not backed by any asset or cash flow of an entity, returns are only based on the movements of the prices.
Expert advice says that investors should not buy coins when they are prevailing at a very high rate. The reason for their high price might be going through a correction, or it is sharp enough to fall. Wait for the price to drop and buy coins at the lowest price.
Patience is the key to success. Prices of cryptocurrency are inherently volatile, and newbie investors should not go in a hurry, and they should start with Bitcoin, invest in it, and calm down. If the market falls, do not take much stress, it will be back to the stable after some time; just wait.
Crypto, like any other financial asset, has its cycle of upward and downward movements in price. In order to return profitable, one must keep enough time horizon for investment.
Avoid heavy bets
Use the tiniest portion of investments in cryptocurrency. Another reason behind this suggestion than volatility is the lack of regulating body and continuous rumors of banning the crypto market by the government.
First, due to the high volatile market, you might lose all money you had invested, like Squid Game crypto coin. Second, if the government banned the market in the country, investors did not lose a considerable amount of money.
If these precautions are considered while investing in cryptocurrency, investors will survive in the long term without losing much money. However, the exact prediction of the market is impossible; play responsibly and have the capacity to bear risks associated with it.
Although, Crypto is not yet legalized the regulators are moving with caution in accepting the same. It is always good to exercise caution before putting a large sum as an investment. There are only a few information providers which are working to provide genuine information for investor awareness. www.coingabar.com is one such platform that is keen on keeping the interest of the new investors in mind. This is a platform with an exhaustive research base to provide investors with the best and most transparent of information in the Crypto space.