The cryptocurrency market is a very inviting space. It is the new, shiny thing that has entered the financial services sector and is slowly becoming something that everyone wants a taste off. The return on investment that the cryptocurrency traders see is something that no other market has been able to provide and hence is a very lucrative investment option.
The market also runs on cutting edge technology, namely the blockchain, and is the first, successful implementation of the technology on a large scale. Another very interesting part of the cryptocurrency market is the startup industry that it has promoted around it. The cryptocurrency market and industry are flooded with new ideas, platforms, and products every day and innovation is at its peak in the blockchain industry.
With such a wide array of opportunities and such high returns, it is hard for newbies to stay away. It is action everyone wants a part of and is lucrative and enticing, to say the least. But, as is the case with most investments, it is essential that you weigh your options before getting involved. It is important to evaluate the why, what, where, how and when before getting into the cryptocurrency market. Here are five things you should consider before putting your money to work in the cryptocurrency market.
Why?
Why the cryptocurrency market? & Why choose Bitcoin?
Before making any moves in the cryptocurrency market, ask yourself why you’re sure the cryptocurrency market is where you should you be. Identify and determine what your motivations are what your final aim is. The answer to this can be anything and if it is a good enough justification for you, go right ahead.
The cryptocurrency market has two sides to it. The financial sector side and the technology side. The cryptocurrency market participants and traders are also divided in the same way. People who are there for the cryptocurrency market’s financial gain and people who are there for the technology and believe in it and its future. Identify which side you belong to.
A lot of newbies join the market because they are driven by FOMO (the fear of missing out). Because they are afraid that if not now they will never be able to get into the market in the future. This is something you do not need to be worried about yet because the cryptocurrency market is still in its infancy. It is not a huge market that has the entry bar set too high. So if you are rushing into the market, driven by FOMO you need to stop.
Another imperative factor that you need to consider before getting into the cryptocurrency market is whether you have enough disposable income. The cryptocurrency market is a very volatile market that sees major fluctuations every hour of every day. If you are someone with low disposable income and a lot of fixed expenditure to add on to it, it may not be the right time to get into the market. Yes, it can make you rich with the investments you make, but it can also go the other way. Make sure that you are prepared and well-equipped for that when it does before you get involved.
The next question after you have identified and determined your motivations and have decided to move ahead is the “what?”.
What?
Now that you have thought about your intentions and motivations to get on the cryptocurrency market, the next question is what you want to invest in.
Apart from Bitcoin and a handful of altcoins, most of the cryptocurrencies are run and are native to a particular platform, exchange or product. So when you are deciding to buy a particular token or coin, find out what these platforms, exchanges, and products are all about and figure out whether you think that the coin has the potential for growth and whether you are still interested.
The questions you need to be asking yourself when you are evaluating a platform, exchange or product are; what does the platform do? Is it logically feasible? Who are on the team building it? What problem are they solving? What technologies are they implementing? Are the tokens within your budget?
Once you have the answer to these questions, you will have enough information and input to judge whether or not the token and the project you want to invest in is worth it. Understand the aim behind the project and also follow and be involved in the community around the project before making your decision.
Usually, after reading up enough about the project, it becomes clear whether or not it is a good idea to invest. Along with that, it gives you a fair picture of the future in store for the project and albeit the coin and what kind of regulations will be imposed on them.
This step takes a lot of time because it involves a lot of reading and research. But this step is also very important before getting into bed with a company because it will make you weigh out the pros and cons of the entire investment.
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Where?
Now that you have decided that you are getting into the cryptocurrency market and have more or less decided which altcoins you want to buy, you need to start considering where you will be taking your business. In other words, it is time to decide the best exchange for your projected portfolio.
There are many exchanges available for the cryptocurrency market. But once you have decided the projects you want to invest in and the altcoins you want to buy, the choice becomes infinitely simpler. Before deciding on an exchange here are the features and factors that you need to be conscious of and consider;
- Security
- Transaction Fees
- Tokens Offered
- Wallet Service
- Reliability
- History
On the basis of these six factors, you can decide which exchange you would like to employ for your cryptocurrency dealings. It is important to know that it is completely normal to use multiple exchanges for different coins and tokens because of market issues. Like some exchanges may not list the coins that you want to buy.
Usually, the safest bet on exchanges to use are the top 10 exchanges in the market right now. Among the ten of them, they list mostly all of the worthwhile coins of the cryptocurrency market and should be able to handle your portfolio without you having to worry too much.
How?
Now that you have decided why you are in the market, what you want to buy and where you want to buy from, you now have to go ahead and make your first purchase.
After you have signed up and into your exchange and have completed the mandated verification process, you can finally buy your first cryptocurrency. Before you do so, however, make sure you identify whether the exchange wants you to deposit money into the exchange platform or you can just pay using your card. Depending on whichever way the exchange works, you can choose the cryptocurrency you want to buy, choose the amount of it you want to buy and go ahead and buy it.
Since you are on an exchange platform, your purchase of coins should instantly reflect against your account, in your wallet. So you do not need to worry about paying and seeing no crypto, because the transfer is almost instantaneous.
Beware that the user-interface of most cryptocurrency exchanges, platforms and products are a little unsatisfactory. But this is something that you will just have to get used to because the industry is still a growing one and things will take time to become user-friendly and good-looking. So it cannot be stressed enough how important it is to choose an exchange that you are comfortable with and know how to use. It is recommended that your first purchase is of a small value so that you can get used to it and make multiple purchases after you are comfortable.
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When?
In the cryptocurrency market, timing is everything. It is important to know when to enter the market and how to make the most of your investment. It is also important to know when to sell and when to move your assets.
Most exchanges in the market provide wallet services to their users and for the most parts, they are quite secure. But the only thing is these exchanges are quite susceptible and prone to hacks, thefts and breaches. And when your assets are stored on them, they are an equal target. So when your digital asset holdings cross a certain amount, it is a good idea to move them to a dedicated offline wallet or something more secure like a hardware one.
But these are things you do not need to worry about if your investments are small and likely to remain small. Because it makes no sense to buy a hardware device and invest that money when your actual investment in digital assets is going to remain low.
Another important thing that every cryptocurrency trader should keep in mind, especially the newbies, is that just because a coin in on a downward trend, it does not mean that the coin is going to become useless. Downward trends reverse and coins recover.
A factor that is often neglected in the cryptocurrency market is the fact that users and traders can also contribute a lot towards safeguarding their digital assets. For example, changing your password every once in a while, choosing a strong password and ensuring 2-factor verification on all your assets go a long way towards safeguarding your assets. Another way you can contribute to the safety of your assets is to make sure that the devices you use for your dealings are secured and kept safe virtually as well as physically.
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Document and Device a Strategy
When you have started making a lot of investments in the cryptocurrency market and have a sizable portfolio, make sure that you document every trade, buy and sale that you do with your assets. While you document your progress, it will also become clear which methods paid off for you and which didn’t. With this information on your side, it will become easy for you to devise a strategy to further increase your gains and profits in the market.
Keep in mind, no one strategy works on the cryptocurrency market, no one solution fits all. So devising a strategy is a trial and error method until you find success in one of your strategies and even that may not always work. It is important that your strategy is continuously evolving and adapting to the market and it is imperative that it takes account of all the changes that the market undergoes.
But above that, it is even more important to have a strategy at all. Because without a plan and a corresponding strategy, you are literally shooting in the dark and that is not something you want to be doing in a market as volatile as the cryptocurrency market.
So make sure that you document every trade, every transaction that you make on the cryptocurrency market and maybe you will accidentally stumble onto a certain strategy that will work for you in the long run.
If you have followed all of these steps and have figured out a strategy that works for you, you are probably or already have seen an amount of success. It is important to be meticulous in the cryptocurrency market, which is why documenting can take you a long way towards that. It is also important to make sure that you know why and what you expect out of the cryptocurrency market so that your methods and strategies can be adapted accordingly. But this is a comprehensive guide and layout using which you can enter the cryptocurrency market.
Happy trading!
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