The Risk Factors In The Crypto Industry For Newbies

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THE GAMBLE OF INVESTING IN CRYPTOCURRENCIES

The crypto industry has been the subject of discussion for over a couple of years. Disrupting the financial sector, cryptocurrency in the form of Bitcoin has seen a massive boom. Some countries are successfully operating these intangible assets, while some are still in speculation of their very existence, having second thoughts on its security aspect, trying to regulate it to ensure ease in transactions while complying with the jurisdictions of the very countries. It is often considered that “The higher the risk, the more the profit” in terms of investments.

Since the pandemic, cryptocurrencies have become the point of convergence for investors. Seeing a chaotic picture of the economy, investors are adopting alternative ways to secure their future reserves. And new investors are joining the race to get a slice of the cryptocurrency. Let alone the stock markets, every other investor in his portfolio is wanting the cryptocurrency asset. In the investment process, subsequently many are suffering humongous amounts of losses. Why? Cryptocurrencies are highly volatile more than the financial stock market. One must have a proper technical and fundamental analysis, be aware of the risk factors, before joining the gamble of crypto space.

As Raj Shamani says:

Taxis don’t like Uber, hotels don’t like Airbnb, bookstores don’t like Amazon, cinemas don’t like Netflix, banks don’t like Bitcoin, every innovation which has the power to disrupt is disliked in the beginning, but we all know that people who understand and are willing to take the risk at the right time in the future technology, they are often the ones who are rewarded. The best time to invest in the technology was yesterday, the second best time is today, INVEST and be willing to take the RISK today.

Counterfeiting isn’t possible in cryptocurrencies. Why? As, instead of an actual ledger, an address is linked with the transactions, backed by blockchain technology. Blockchain, playing a decentralized, distributed platform makes it easy for everyone to have access to the transactions.

INVESTING IN CRYPTOCURRENCIES ISN’T A PIECE OF CAKE!

It’s difficult to think of the right time while investing, but buying and selling at the wrong time can cost you a lot of money. As ‘Investments are subject to market risks, taking risks in the right way will make you love HODLing these beautiful pieces of intangible assets. These assets have surely become a subject of debate amongst the newcomers who are probably not aware of the risk factors associated with them. Listed below are some of the risky highlights for the newcomers in order to invest in a right and secure manner. So, here we go:

TAKE THE RISK WHICH YOU CAN BEAR!

Invest with the amount that you can afford to risk. Don’t use credit cards or so. The volatility of cryptocurrencies is not similar to the stock market. Plus, the added risk comes where countries may outlaw crypto trading and exchange. So the safe option is not to liquidate and HODL it for as long as you wish. Early investors are always at a benefit as we can see how Bitcoin(BTC) got a massive hike now from 10 years back.


Stay calm Do proper risk management Diversify a bit Only invest with money you don't need urgently Don't invest with your next month's rent Expect some system issues Don't fall for scams Be responsible to, and take responsibility, yourself Stay #SAFU — CZ 🔶 Binance (@cz_binance) February 9, 2021

HAVE A BRIEF IDEA ON EVERY EXCHANGE

Cryptocurrency exchanges are open 24/7, unlike traditional exchanges. Exchanges like Bitfinex, Coinbase, Robinhood, Binance are some of the exchanges to start with. Perform day trading, scalping, swing trading only when you have sound financial knowledge. Don’t go for the guessing game as it’ll make you regret a big time.


DO A THOROUGH RESEARCH BEFORE INVESTING IN THE VOLATILE ASSETS

Have a prior idea with coinmarketcap, Binance, on any cryptocurrency. Start with investing in small amounts. You simply can’t afford to dump your fortune as prices in the crypto space are highly volatile. Anything can happen and it’s likely for you to suffer losses. You can even look at price charts, cause you won’t be buying at its pumping/skyrocketing time, normally you’re gonna be buying when the price is mostly stable at the low level, not at its extreme dip though.

Assets create volatile market conditions. It also depends on the price of BTC. When the price of BTC goes up, assets go down and vice versa. The market gets highly unclear when Bitcoin gets volatile. So, better not to trade anything at that time.

NO CHANCES FOR INNOCENCE!

Rely on whitepapers or articles to understand the merit of coins. Look for the value the coin is bringing into the ecosystem. The whitepaper will give a legit reason to invest in the coin. As there are poorly written whitepapers that are the exact reason for not investing in the coins. Many investors usually don’t bother to go through it, which is a massive blunder as they end up getting disappointed for not having the potential returns.

On the other hand, ICOs take advantage of this ignorance by outsourcing their whitepapers to freelance writers. An ICO shouldn’t be paid heed to if they cannot put much effort. Just give a good thought on why Ethereum got a hike so fast, why investors run after BTC, ETH, etc. 


.@Twitter CEO Jack Dorsey: #Bitcoin whitepaper is “poetry”https://t.co/KeBlaAdKti pic.twitter.com/SWZcCY85zp — ICO Drops (@ICODrops) April 28, 2020

DON’T FALL INTO THE TRAP OF NEWS AND VIEWS. DO YOUR OWN HOMEWORK!

Try to opt for a technical analysis rather than a fundamental analysis. The reason why because the prices’ sequence itself will reveal a story of the coin, which will help us predict its probable performance in the coming time.

Bitcoin’s worth was very little back in 2008-2009, but gradually, its value exploded as it reached $20,000 in 2017, even a bigger dip at the end of 2018. Coins like these need to get used often to actually gain real value.

BETTER NOT TO FALL FOR ALL-TIME-HIGH (ATH)!

You should have a succinct reason for trading or invest in cryptocurrencies. The cryptocurrency market is run by the large whales, the institutions which invest sumptuous amounts of money in the cryptocurrencies. Holding a huge amount of patience, the investors wait for one mistake of the novice traders in order to gain all of the amounts. It’s like gambling, a bet that starts among the investors to hold the maximum amount of money.

Always set for targets and take full use of stop-losses. Stop losses will help you to stay from probable loss. Every bet that you make should give an inkling as to when to get out of it.

In stop-loss, don’t get carried by your emotions. Stick to the price where you attained a coin initially, which will lead you to be sated with your investment in the first place.

LOOK FOR THE MARKET CAP!

If investing for the long term, don’t go looking for the cheaper price, refer to the market cap. As the market cap of the coins induces high returns to all your cold storage coins. You never know when the coin will reach the moon. Don’t be in a state of FOMO and end up buying it. Always look for the credibility of the project.

GET A DIVERSIFIED APPROACH

Get a diversified portfolio as then you can also opt for swapping the coins as there are wonderful projects in Uniswap which are proving to bring potential returns to the one investing and participating in the liquidity pools.


Yes, I own a few different crypto assets as part of a small but diversified portfolio. I only risk as much as I'm willing to lose. — Andreas (BEWARE of giveaway scams!) (@aantonop) June 13, 2017

ALWAYS BE CAREFUL OF IDENTITY THEFT

Be super careful with the websites you visit, a plethora of websites pretending to be crypto exchanges and wallets are there to steal your logins and passwords. To be on the safe side, double-check the URL, go for the padlock, as the SSL( secure ) certificate ensures the password submission to be secure. Bookmark the secure websites for further access in the future.

Source: chainalysis

It is always good to have an account of an exchange that has its physical existence near your place. As then you can get the money back if any problem arises in the transaction procedure, otherwise, go for countries that have a good legal system.

Source: consumer.ftc

SECURITY IS THE ULTIMATE SAVIOUR

Crypto transactions, being transparent is both the advantage and disadvantage of using an anonymous peer-to-peer networking system. If you hold it in a safe way, you’ll be in possession of a treasury. There’s no such thing as transaction reversals. If stolen, the government won’t reimburse you for your loss.

Most of the newbies go to Coinbase because it has a friendly interface with a website and an app. Secure all your passwords in a notebook. Be very careful while creating passwords, don’t create them anywhere and everywhere. 

Secure your account, get a physical security key to prevent identity theft. It’s an additional form of security almost similar to a two-factor authentication type. If a hacker gets access to your web address, they won’t be able to get full access if you have a private key. However, you can opt for both Hot and Cold Wallets. If it’s on a day-to-day basis, you can think of opting for Hot Wallets. But for HODLing it for the long term, cold storage is a must for safe storage of your cryptocurrency rather than making them hover in the exchange account.

CONCLUSION

Cryptocurrencies are just in their initial stage, haven’t yet received the mass adoption stage, however, these assets might be the next big thing for institutional investors to bring a revolution in the financial sector. We mustn’t miss the race, and at least try with whatever potential risks we can afford to take to benefit from it in the long run.

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