Cryptocurrencies, you heard about them a lot during last few months.
But what exactly are they and what you should know before buying any of them?
Why Bitcoin is that popular? Because it became the first implementation of blockchain technology back in late 2008. Only later other cryptocurrencies started appearing on the market. There are more than 1,5 thousands of them, but it doesn’t mean that all of them are useful and have any value.
Every transaction is basically done by people for people. All the transactions are recorded on thousands of blocks, which are created by thousands of people. That’s why it is decentralized because if for example one block has been rewritten, it will be immediately noticed and it won’t be approved, which is not a case with banks. Thus, people trust other people, all transactions’ history is recorded and open to everyone anytime. However, no one knows to whom all of these addresses with crypto belong to.
What mistakes are better to avoid when you are new?
1) Make a bank transfer to your exchange account, instead of paying by card, which is equal paying much higher commission fees. Have in mind, that it may take from 1 to 3 working days.
2) Have money on two exchanges, so that you will be safe if some exchanges might not work for few weeks, what happened with Kraken exchange a month ago.
3) Every crypto project on their website has to have a roadmap and a White paper (the most important document, which basically describes, what is this coin for and who does it work)
4) Every project has to solve a problem, if it is a blockchain project just because they included the Blockchain name in it as Kodak did, it is not advised to invest in it.
5) Think about your investing plan:
For how long are you going to invest?
What is your BATNA? (what is the maximum amount of money you are ready to lose)
6) Check the road map of every currency, you’re going to invest so that you can predict during what period of time their value can go up so that you can sell them before their value will decrease.
7) Invest only money, which you can lose, simple, but extremely important advice! Everyone is an expert when the market growths, but when it’s not, it’s better to save at least what you’ve invested. When you are playing short than you have to have certain skills before doing that.
8) If you invest a significant amount of money, then think when you will need to withdraw them, so that when you will need money and there is a downtrend on the market, you won’t have to sell them immediately, because you may need invested money urgently.
9) Write passwords in different papers and place them in different places, because remember that if you lose them, your wallet is gone forever!
10) Don’t invest in ICO without experience in trading and understanding how cryptocurrencies work. Don’t let numbers like “500% growth in a month” fool you because after huge rise there is usually a huge decline.
11) Investing in top 10 main cryptocurrencies on the market is always less risky and advised when you are doing your first purchase so that later it will be easier to exchange these coins for some interesting projects.
12) Try to diversify your portfolio. Having at least 2-3 different coins in your portfolio will reduce your risk in case of a rapid decrease in one of your coins value.
13) Remember that each exchange platform has a limited number of coins for trade, so before transferring money check the availability of coins, you wanted to buy, on your exchange platform.
To conclude, advice from Warren Buffet:
1. Only make investments that you understand
2. Don’t be a day trader