5 Steps You Need to Take Before Investing in Crypto

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a gold stack of coins with the Bitcoin cryptocurrency symbol on them

Many businesses wanting to be ahead of the curve are now embracing crypto to keep up with ongoing digitalization and benefit from navigating blockchain. Perhaps you have been considering entering the cryptocurrency market as well. Still, until this point, you were unsure where to begin, what cryptocurrency to choose, or how to recognize a legit exchange platform.

The number of individuals investing in cryptocurrency has drastically grown, but most blindly enter the crypto market without any theoretical background. They measure their odds on widespread success stories about people becoming millionaires overnight instead of well-thought-through investing practices.

As a newcomer, you may feel like you’re missing out on some great investment opportunities, so here’s a rundown of the most fundamental steps to take before you venture into the real world of crypto.

1. Know What You Are Investing in

Cryptocurrencies are the emerging future of global markets, and one of the most important factors to consider is to acknowledge and accept the diversity and volatility of the crypto market.  And be prepared to invest only as much as you’re willing to lose.

After that, decide what kind of crypto market you’re aiming for. Whether it’s going to be well-established cryptos, such as Bitcoin, or lesser-known alternatives? The first option is less risky, but the potential return on investment is often smaller.

If you consider yourself an aggressive player, you might be a little more drawn to riskier, lesser-known coins. In that case, I would recommend following crypto insiders such as the Crypto Lark to dig deeper into the subject and find out which smaller coins have potential.

2. Don’t Fall for the Scams

Unfortunately, the world of crypto scams is flourishing, and scammers are getting more creative every day. Each time, they use new, sophisticated ways to lure targets into their cobwebs. Even the most well-known fraud cases are alive and well, reaping the harvest even from well-experienced traders.

Take the recent Ponzi scheme case, where a 24-year old hedge fund manager was sentenced to seven years in prison after pleading guilty to security frauds on his flagship hedge fund. This convict was running the scheme for over three years, collecting over $90 million in assets. If you don’t want to become one of many who got scammed, watch out for red flags such as unregistered sellers, high ROI without risk, issues with paperwork, or secretive investment strategies.

Another one of the worth noting scams is pump and dump. In this case, fraudsters are all about creating hype around a particular coin, so the interest will surpass its total market coverage, creating a false value. Buying unknown coins, falling for celebrity-promoted altcoin, or doing leverage trading is a simple downhill battle – you’ll lose more than you can afford to invest.

These are the most typical strategies used by stock touts trying to get the best of you. If you are offered an investment that sounds too good to be true, for example, guaranteed returns with no risk, think again.

3. Decide on the Right One for You

After extending your knowledge and awareness of the market, it’s time to decide which cryptocurrency to invest in. If you’re entirely new to crypto investing, consider choosing Bitcoin, Ethereum, or other well-established and widespread cryptocurrencies.

They tend to hold a well-grounded track record and demand among traders. Additionally, they are more resilient to price fluctuation. Moreover, if you need to liquidate your tokens in a hurry, you’ll have easier and broader access to potential buyers.

If you want to become more of an expert, you need to deep dive into research. Firstly, look over the founder’s or team’s history and whether they’re capable and trustworthy. Knowing that, try to find an active developer community that builds projects based on crypto, such as dApps, to ensure the validity of researched crypto.

After that, consider the utility factor –the more useful a cryptocurrency is, the more potential it brings. Then, check out the network size and exchange-rate dynamics. The more people use a crypto coin, the higher its market capitalization and the lower the investment risk.

For example, in the past year, Solana has been one of the most successful cryptocurrencies. From being relatively unknown a year ago, it now ranks in the top 10, and there’s one solid reason for that  – it solves an important issue, scalability. You can process around 50,000 transactions per second on Solana. Bitcoin handles only seven.

Another example is Uniswap. In essence, it’s a decentralized exchange platform with its game-changing advantage of being fully automated, leaving out all middlemen meddling with the processes. That said, the past performance of any crypto does not mean that it will also perform well in the future. There could already be new and improved digital currencies in the making. Therefore, investors need to stay vigilant in the crypto markets.

4. Choose the Exchange Platform

Once you are up to date with the theoretical background, it is time to find an exchange platform to start investing. There are many out there, and all provide a great variety of investing possibilities. They offer different ways of exchanging, and a range of fee structures, special offers, and attractive features:

  • Make sure the exchange you’re interested in assures multi-currency support. Some of them only offer a limited number of coins, that’s why it‘s essential to know which currencies you want to buy beforehand.
  • Before you can start trading, due to anti-money-laundering laws, a crypto exchange will begin the process of Know Your Customer (KYC), asking you to verify your identity. Depending on the platform, the verification process can differ significantly and take anywhere from minutes to weeks.
  • Stay aware of fees and rates because that’s how exchange platforms earn money. These can generally range between 0.1% to over 10% per transaction, so look for a good trade-off between convenience and fees.
  • Search for a user-friendly interface with easy-to-use features that help you stay better-informed and reduce the risks of making mistakes.
  • Good security is what you should aim for. You probably wouldn’t trust a shady salesman you met in a dark alley with your life savings, would you?

Don’t forget to check on your fellow traders’ experience, too. At Cryptoradar, we believe there’s no better way than receiving complete insights and an overview of exchange platforms through real-life stories and opinions from experienced investors. A good exchanging platform should be a trustworthy cryptocurrency exchange, giving you access to useful features such as price comparisons.

5. Learn How to Store and Secure Investments

Even though crypto wallets might seem similar to traditional wallets, they don’t store your cryptocurrency. As cryptocurrencies are decentralized, they aren’t stored in a single location. They’re being held as transactions and stored on the blockchain.

In simple words, cryptocurrency wallets are like bank accounts, allowing you to track your balance and make transactions, all from one place. Cryptocurrency wallets facilitate transactions between the owner and end-users.

You want your money to be handled in the most secure way possible, so think twice before selecting an exchange platform to safeguard and store your money. According to the report, trades lose $2.7 million every day on average, which will only increase in the future. This puts your valuable digital tokens at additional risk. However, there are two main types of cryptocurrency wallets you should know about:

  • Hot wallets are accessible online. Although they provide more flexibility, and you’ll be able to access your investments on the go, they’re less secure and more vulnerable to hacker attacks.
  • Cold wallets come in a physical form, such as a QR code, and are completely disconnected from all online sources. Although this level of security means it is fully sealed, it also makes it more likely to be lost, or you might find it challenging to enter trade funds while traveling.

Crypto markets are particularly volatile, with noticeable upswings and downswings. To avoid panic, here’s the golden rule to apply to your mindset – only invest as much as you can afford to lose.

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