What To Consider Before Buying Cryptocurrencies

What To Consider Before Buying Cryptocurrencies

22/05/2018 Off By Cam Stroud

People make a decision to buy some cryptocurrency out of different reasons. Some seek instant profits, some treat it as an investment, and others are just curious as to where it all going to go. Regardless of the cryptocurrency to make an investment in, consider your purpose and what kind of investor you think you are. If you hate giving money away with no payback guaranteed, meaning you are a risk averse investor, investing in ICOs is not for you. E-currency investors have to ask themselves how much money they are ready to lose. If you can survive losing money for the sake of higher returns, cryptocurrency is the right choice.

Quick Gains

Cryptocurrency trading is a way to go for those looking for immediate profits. In order to successfully buy and sell cryptocurrencies, you have to consider the following:

  • The e-currency you are planning to trade with should be liquid. The more liquid the currency is, the faster you are going to sell it. Sure thing, bitcoin is the most liquid and, sure enough, the most expensive one. However, altcoins are gaining more and more popularity with each day.
  • Buy low, sell high. A golden rule of trading but it is not always as simple as it sounds. In order to guess the timing, you need to consider technical and macroeconomic indicators, which requires certain skills.
  • Cryptocurrency has to be one of many securities in the portfolio. Considering the riskiness, you may want to diversify it with risk-free investments such as those in T-bills.

Long Term Strategy

Odds are, you are among those investors who are not demanding returns right away. The majority of experienced investors know that huge profits come from patience. There are lots of cases, when individuals sell a financial asset as soon as its price starts to go up – forgoing much greater returns sometimes. In case of cryptocurrency, try to consider various factors that make it valuable. Let’s take BTC as an example. It is backed by demand and other factors such as blockchain technology, its deflationary nature, limited number of tokens, etc. Therefore, in the long run, demand for bitcoin may surge because of one of these factors.

Additional point to consider is where you are going to keep your token. You can purchase a mobile app crypto wallet, a wallet for desktop, or a more reliable hardware wallet for even better safety. You have to be aware that many online frauds involve hackers’ hunt for cryptocurrency. Therefore, you have to take care of your own security by keeping tokens protected. If you plan to keep your e-currency long term, hardware wallet will be a good investment.