Beginners Guide on How to Invest in Cryptocurrencies

Cryptocurrency investors argue that it is the future of a unified currency for the whole world and that it has paid off big time for some investors. On the other hand, stories are going around about people losing their hard-earned money through investing in cryptocurrencies.

If you look at the price graph of one the most traded cryptocurrency known as Bitcoin, it does attest to both the claims made against it. It shows that there was a period where its value appreciated so much and that’s when the cryptocurrency rush started because of the profits that were made.

After a while, the market depreciated immensely and drove those who had invested in a loss which made most people skeptical. Worry not because after reading this you will have an idea on how to invest in cryptocurrency.

Have the correct amount of risk appetite

Cryptocurrency for beginners is no fun-ride if the right knowledge is not there. Avoid at all costs the gold rush feeling by cashing in your savings and throwing all of them in cryptocurrencies or any investment on that note.

Every investment has a certain level of risk including cryptocurrencies, so you shouldn’t invest money that you can’t afford to live without. The volatility of this type of investment gives you exposure to more risk but more returns also.

The word risk doesn’t only convey the meaning of the chances of losing your money but also the chances of profiting from your investment.

What are your options?

Unlike three years ago you now have a diverse pool of Cryptocurrencies available. Before many cryptocurrencies debuted, it was Bitcoin that called the shots in this market but lost its market position in 2017 when other players came in.

Right now, there are more than 1 600 cryptocurrencies available over the internet. Bitcoin is still the most dominant alongside many other new currencies like Ripple, Ethereum, etc.

Research the coin you have chosen

The worst investment decision you can make is going in blind without any knowledge of the cryptocurrency you want to invest in. Because of this, you have to download and read through the white paper of the Initial Coin Offering.

If it doesn’t have one that is a clear indication that you shouldn’t even consider investing in it. A poorly written whitepaper is also an indication that you shouldn’t invest in that cryptocurrency.

What to look for in white papers?

A white paper is a report giving guidance or information on a matter. It’s a company’s philosophy on a proposal that it’s coming up with.

The most important thing you should look for in white papers is the value it is adding to the market. There are a few concerning matters that need to be addressed like improving privacy, scalability and interoperability. If a company states a plan to address these matters in its white papers, you can start considering investing in it.

Check for Signs of a Scam

Reputable cryptocurrencies have a mandate of being transparent and have a technically enthused community. On the other hand, cryptocurrencies that may be a scam focus on selling the get rich quick lifestyle and are not that transparent.

It is not an easy task to get to know who are the good guys and the bad guys, but the extra effort is worth it. And those who don’t know how to invest in cryptocurrencies are prey to the crypto scams.

Doing a background check on the people involved in the project is also worth your time. Searching them on Google and checking their background and previous work will yield great results. It will also help by giving you an idea if the person really exists.

If it looks like a pyramid scheme, it most probably is one. In this case, avoid all cryptocurrencies that require you to recruit people.

The cryptocurrencies don’t supply any investment but rather gives you the promise of payment. You should also avoid cryptocurrencies that promise guaranteed returns because there are no guarantees in the real cryptocurrency world.

GitHub Repository

If a cryptocurrency doesn’t have an active GitHub repository that tells you that there aren’t enthused developers that want to partake in the project. An insufficient number of developers indicates that the project is not a quality product, so they don’t want to waste their time developing it.

When is the right time to invest?

The right time to buy is when most buyers view the currency as valuable because the price is valued by the opinions of its investors. This happens when a lot of people are confident in that cryptocurrency. They will invest in it and then the value will appreciate.

In this case, you should follow the crowd by looking up at online chat forums that which reputable cryptocurrency is the most valuable.

You should also give it time and don’t jump in before you know for sure if it a short-term craze that will explode or if it will last. Once you have invested hold for as long as you can to reap the best results.

Tax implications

There are no direct laws concerning cryptocurrencies for now so it might be hard trying to figure that out. Although this is true, you should see a tax consultant so that you don’t end up in Uncle Sam’s bad books. It may require that you be a little patient with them when they are confused about the tax matter.

Conclusion

You now know the basics of investing in cryptocurrency. All that is left is for you to pick a cryptocurrency you would like to invest in using the information above and apply the knowledge that you have received.

he most important skill in this industry is being open-minded to new ideas and embracing all the new knowledge that you will get along the way. All the best on this path you have chosen and may you continue investing safely and smartly.

Author Bio:

Bryan Davis is a blockchain and cryptocurrency blogger who has followed the trend since it’s inception. His knowledge in crypto arena is impeccable and therefore, he has acted as a consultant for many cryptocurrency startups and is currently working for EduBirdie. When not at work, he spends his time in the hills camping and photographing.

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