Cryptocurrency exchanges offer an exciting investment opportunity for those looking to take on high risk trading and escape fiat currency. There are a number of trusted exchanges to choose from, including Coinbase and Kraken, and even new exchanges, such as EthBits. Choosing a trusted exchange and a coin to bet on requires in-depth research on the tech and company behind the ICO. Fortunately, we’re here to provide you with some basic tips on getting started in cryptocurrency and the dos and don’ts of the industry.
Considering how much the value of Bitcoin has risen in its 8 years so far, it’s easy to get caught up in too much speculation and purchasing an overpriced coin. This often happens with ICOs (Initial Coin Offerings). Everyone wants to get rich off of the next big coin (Litecoin for example and maybe now Bitcoin Silver!), but there are countless examples of failed cryptocurrencies, such as Ethereum’s infamous anarcho-coin DAO.
Understand that cryptocurrency markets are up 40% more volatile than other traditional investment markets. The key is not to get stuck with a cryptocurrency that is insecure and has a high bid-ask spread. Cryptocurrencies with little liquidy are more expensive to purchase and harder to sell in the event of turmoil. Of course, no one has ever struck the jackpot by dumping all of their assets.
Manage risk by investing in established coins first and purchasing low friction assets. It’s key to maintain control over your assets and check up on the exchanges daily. Shielding against risk early on is key, but don’t let it leave you blind to potential money making opportunities. Investment is a game of risk after all.
While you may think that bitcoin and cryptocurrencies have developed into a bubble, they’re actually a bull market that’s not appearing to go away anytime soon. Fortune ran an article this year stating that $5 worth of Bitcoin in 2009 is now worth $4.5 million 8 years later. Bitcoin and other established coins are still the ideal place to start your cryptocurrency portfolio.
Using index tracking you can begin to track the top performing cryptocurrencies and yield great returns on your portfolio, regardless of market position. Bitcoin is a very liquid asset and has high demand, which only fuels its constant growth. It’s ideal to invest in a safe exchange and purchase some bitcoin when you can match the price. Off of this you can begin to diversify your portfolio to other ICOs and bull market cryptocurrencies.
Only invest in an asset or IPO you have thoroughly researched first. Invest in something you wholly understand and would even use. What is the staying power and the history of this company? What outside investments are they receiving for their venture?
If you’re investing in a new cryptocurrency than invest in one with enough security and encryption to protect transactions. Ideally, you’ll want to invest in a more decentralized currency that offers greater protection from hackers and more secure exchanges. Look for exchanges and clients that allow you to switch your IP with each transaction to make it harder for hackers to track you down.
This leads us to our final and most important tip. Protect your wallet because hackers are out there and cryptocurrencies are a profitable market.
Don’t leave trades open when you’re not around and always seek password protected, multiple site authentications. Don’t use public computers, wi-fi, or other people’s devices to conduct transactions. Some one can always track you down your transaction history if you make it easy for them.
One idea that many experts suggest is using hardware ledgers. These are external USB devices that hackers would physically have to compromise to hack. Best of all, they support most forms of cryptocurrency, including bitcoin.