After the global cryptocurrency market cap reached an all-time high of $2.97 trillion in 2021, it’s safe to say that Bitcoin and the dozens of altcoins have finally begun to enter into the mainstream. As a result, interest in these digital assets has soared, resulting in a swarm of new investors wanting to get in on the action and turn a profit.
However, it’s important to keep in mind that the cryptocurrency industry is still in its infancy, which means that many of the platforms you must use are still a long way from being as user-friendly as most people are accustomed to. Furthermore, due to the vast amount of capital flowing through many of these projects, scammers and opportunities lurk everywhere.
With this in mind, it’s critical that you keep your wits about you when purchasing cryptocurrencies if you want to ensure that your assets are safe and that you are protected at all times. On that note, here are four tips to bear in mind while purchasing crypto assets in 2022, as well as a bonus section on some frequent blunders to avoid. Let’s get started.
1. Understand the risks
Before you invest your money, you need to know what you are getting yourself in for. Foremost, you must understand that the vast majority of the cryptocurrency industry is unregulated. This means the projects aren’t backed (or secured) by any financial institution or government body. In other words, if things go south, there aren’t many places you can turn.
Secondly, the space is still very new. Due to this, many of the projects you will come across are still in the start-up phase and are highly likely to fail. When investing in crypto, the chances of your investment becoming worthless are substantially higher than it would be when investing in the stock market or forex, for example. However, the flip side of that coin is that there is a lot of profit to be made if you can manage to jump on the right coin early enough.
Lastly, crypto assets are extremely volatile due to the speculative nature of the market. It’s not uncommon for Bitcoin and the altcoins to fluctuate by ten or even 20% in one day, which rarely happens in traditional markets.
2. Find an exchange that works for you
If you decide to take the plunge, one of the most important factors you need to consider is the exchange you will use to purchase your coins. You need to find an exchange that works for you, which means locating an exchange that operates within your geographical location, has solid security features, and offers the coins you want to buy.
Thankfully, the exchange offerings have increased dramatically over the past few years. Now investors can choose from a wider variety of platforms and aren’t confined to Coinbase and Binance. Take Roobic, for example, which offers a low-cost alternative for business and retail investors to access the crypto market. Roobic even provides a noncustodial wallet that gives you full, unabridged access to your coins.
3. Do your research
By now, you have probably already come to realize just how noisy and full of misinformation this space can be. Research is key if you want to succeed in the crypto world. As such, you must always maintain a dose of healthy skepticism when analyzing projects. Always do your research, and never invest in a coin just because someone promises you it will be the next big thing.
4. Have a plan for when things go wrong
As Mike Tyson said, “Everyone has a plan: until they get punched in the face.”
In many ways, this is the experience that most investors are welcomed with when first purchasing crypto. They buy into their favorite projects, only to find themselves down by 30% in just a few short days. Of course, you could be one of the lucky ones that buy-in at the bottom, but the chances of that happening are pretty low.
Therefore, try to have a contingency plan for when things go south. Acting on emotion and panic selling is a surefire way to lose your capital, but sitting there and watching your money erode isn’t exactly the optimal solution either. If you can predetermine your actions when the market inevitably crashes, you will be in a far better situation than most.
Things to avoid when buying cryptocurrency
Do not leave your funds on the exchange
Some exchanges, like Roobic, offer a non-custodial wallet. This means that you have complete control over your coins, regardless of what happens to the exchange. However, you do not own your private keys with most of the other exchanges out there, such as Binance, Kraken, and Coinbase. In short, this means that the exchanges have control over your assets, and if anything goes wrong, you won’t be able to access your funds. Therefore, make sure you transfer your funds to a wallet where you control the private keys. If you want to be extra safe, secure your assets using cold storage (such as a Ledger).
Never invest more than you can afford to lose
It is a mantra that is often passed around investing circles, but an important one indeed – especially when it comes to crypto. Any money you invest into crypto assets should be money you can afford to lose. This is a highly volatile space, and the chances of your investment going to zero are very real.
Do not attempt to trade unless you know what you are doing
Last but not least, do not attempt to trade the markets unless you are confident you know what you are doing. A survey of eToro day traders discovered that roughly 80% of them lost money over a 12-month period, indicating that being one of the few that makes a profit is an exclusive club.
While there is plenty of money to be made in the cryptocurrency industry, it’s essential to approach investing in this space with caution. Despite there being many opportunities for profit, the downsides are just as apparent, especially if you fail to do your research and buy into projects without giving them much thought.
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