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As cryptocurrencies are back on showing health and impressive upwards trends this year unlike what happened in 2019, regular and professional investors are back on the crypto bandwagon. Investing in cryptocurrency can be quite daunting, it is this new thing that most people are stepping into without prior research or sufficient information on the matter. However, a lot of the uncertainty in regard to trading crypto could be quelled if proper research is done along with a solid strategy set prior to investing.
First things first, cryptocurrency trading is substantially different to equity or bond markets, as it is not suffice to simply look at traditional measurements such as the debt-equity ratio of a company. When it comes to crypto there are other things in play, and in this blog, we will try to guide towards those things which are necessary steps for every potential crypto investor, prior to delving into the new territory.
What steps should you take before investing in Cryptocurrencies?
You need to know what you are investing in.
The easiest way for you to lose your money is investing in something you know nothing about. When it comes to cryptocurrency trading, it is crucial that you have at least a basic understanding of the technology behind cryptocurrencies in general which is blockchain.
Be careful of believing everything you read or hear.
While word of mouth could be beneficial a lot of times, it can also be risky, so you always fact check everything you hear before implementing it as part of your investment, especially when it comes to a new territory like cryptocurrency. Also, you have to do the same with the things you read, plethora of websites and media platforms claim to have the ultimate truth when it comes to cryptocurrency trading, but you always have to go to trustworthy sources such as thetopcoins, CoinDesk and/or Coinmarketcap.
Familiarize yourself with the functionality nature of whatever you are buying into.
When you are finished with researching the general technology of cryptocurrency, it is time to delve in the specifics related to the coins you opt to invest in. One important aspect that should be looked at carefully is the functionality aspect; is it a coin, is it a token? And if it is a token, it is a security or utility one. I know, it sounds complicated and hard at first, but to start you off with a small tip, as an investor you should probably opt for a security token, as it will give you voting rights and dividends in case the company makes a profit. Whilst a utility token like the Basic Attention Token (BAT) can be good at times but you are buying access to the company’s future services.
Beware of fraudulent and sharp practices..
Unfortunately, with the blessings of open source networks comes the concomitant curse of fake news and false hypes. As soon as you get in the cryptocurrency realm, you will find out the volatile nature of its pricing. Accordingly, there are a number of low-tier cryptocurrencies with a poor market cap and a calamitous organisational strategy behind it, which use hideous tactics such as posting up fake values of its coins and/or spreading false promises that would trick investors into doing something against their financial interests in a lot of cases.
In conclusion, it would be safe to say that albeit researching into cryptocurrency prior to trading can take up a lot of your time, but it remains a necessary step that would stop you from losing a lot of money.