Are we at the top of the cryptocurrency-mania? Sure, we are, for fewer things have seen the monumental growth that digital currencies witnessed in the last few months, particularly in April, when Bitcoin crossed the $60,000-mark. Having said that, the volatility and uncertainty that surround the cryptocurrency world have kept many of us away and wary of it. But the temptation, equally fuelled by the chatter, refuses to go away. Experts have said that blockchain is here to stay, even if it doesn't replace conventional money altogether in near future.
So, if you are also one of those tempted to invest in cryptocurrency but haven't because of the risks associated with it, let's figure the ways we reduce the chances of losing money.
Here are five ways to reduce the risk:
1) Extensive Research
Research, read and then act. Before going ahead with any cryptocurrency investment, reading its whitepaper is of utmost importance. It gives you a fair idea about what the company's plans are and if they align with yours. Remember, other's research is not your research. Dedicate time to reading and understanding a digital currency before giving in to the temptation of investing in it. Laziness can cost you your money, don't let it settle.
2) Check if you have enough money
If you happen to be a beginner, make sure you use only the buffer money, for many have committed the mistake of investing their hard-earned money, thinking they would turn into profits soon. So, invest only if you have enough capital and if the money you plan to invest is not required elsewhere in the immediate future. Don't even think about taking a loan and investing in crypto.
3) Keep a keen watch
First, the exchanges in cryptocurrency aren't completely secure. There are no clear-cut rules or regulations and, therefore, there are umpteen possibilities of you being scammed on the internet. Once you lose your money, there's no way you are getting it back. Therefore, every step has to be taken with extreme caution. Read the circumstances under which others were scammed so that you don't fall for them.
4) Keep evaluating the market
Let's underscore one thing here — that cryptocurrency investment is not a sure-shot method to make money. Besides the risk of online scams, there are genuine possibilities of losing money or sustaining heavy losses. Hence, it's important to be on your toes all the time and understand the direction in which the market is going. Depending solely on the unit price of a token will only lead to disappointment for you. With time, you should be able to predict the mood of the market. That's when you start making money.
5) Don't invest in a digital asset just because others are doing it
The idea that a particular token or coin is doing well at the moment and should be invested into might entice you. You might even think that you are letting go of an opportunity to make some good profit, but for beginners, it's important to not cave in under pressure just because others are investing. Take time, do research, and invest only if everything adds up. That others are investing and, therefore, even you should, is not the right approach.