Cryptocurrency has become a leading digit asset in a very short time. Even though the market is highly volatile and the price of cryptocurrency may rise and fall instantly, investors are very interested in cryptocurrencies. The return they might get through these investments is the factor attracting the investors. However, cryptocurrency is a relatively new investment platform, and therefore, many people are unaware of the process of trading and investing in cryptocurrencies. It is quite different from other investment methods and therefore, investors have to be very careful while investing. Here are some of the rules you have to consider while trading cryptocurrencies.
- Avoid big bets
Several cryptocurrencies are providing high returns recently, which is attracting several investors to cryptocurrency. However, you have to ensure that you invest only what you are willing to lose. Even if you are willing to take risks, do not place big bets. It is advised not to invest more than 2% of your portfolio. After you gain experience and study more about each coin, you can invest more.
- Extreme volatility
To learn more about cryptocurrencies, you have to invest in them. But it is very risky as they are highly volatile. Sometimes, you may even lose what you invested. The price may fall overnight, causing huge losses. Expect this when you enter a crypto market. You must expect that there can be instant variations in your investments.
- The platform used has to be trustworthy
There are no regulations for cryptocurrencies in different countries and therefore, there are many frauds in the market. So investors have to be very careful when choosing a platform to buy or sell cryptocurrencies. Choose a trustworthy and established platform as an intermediary to trade cryptocurrencies. Thus, you can save your money even if any setback on regulations happens.
- Verify the tips you get
It is very difficult to find credible data and information about the crypto market. There are huge heaps of unverified information on various social media platforms. Several people emerge as crypto-analysts offering their tips to the group or communities. Some of the allure beginner investors with their tips and charge some fee for these tips. However, you have to make sure that you verify all the tips you get before investing in them. Ensure the trading volumes and market cap of the coins before buying them.
- Target the bluechips
There are bluechips, penny coins, and mid-caps for the crypto market, quite similar to the stock market. Several people tend to buy a lot of coins just because they are available at low prices. However, bigger coins will be stable even if they are expensive. If the price is costlier for you, you can purchase in fractions. Bitcoin is considered to be bluechip of the whole crypto market.
- Consider the global developments
The developments around the world can affect the price of crypto coins. Therefore, investors must closely watch the changes happening in the major markets like Europe, the US, and Singapore.
- Consider the tax
Different countries will have different taxation systems for cryptocurrencies. Do not forget the tax you have to pay for your crypto income. Wherever the country you stay in, understand the taxation system for cryptocurrencies and act accordingly.