Bitcoin promises to be a highly disruptive financial instrument, capable of revolutionizing our fiscal system. It is, effectively, the first entirely decentralized, peer-to-peer payment network. Distributed systems have many inherent benefits. There are no costly transactions fees. No sluggish middlemen. No controlling central authorities. As a whole, the ecosystem empowers the individual over any collective group.
Bitcoin, as well as many other similarly architected cryptocurrencies, are built on top of blockchains. Blockchains, at a high level, are shared, encrypted ledgers that manage access and data points. In this case, the implemented ledger is designed to publically store Bitcoin transaction information. Although each buy/sell/trade is recorded in a public log, “names of buyers and sellers are never revealed,” thus maintaining anonymity for all participating parties. And, since all of the details in the transaction are carefully encrypted, there is little to no threat of fraud.
Serial technologists are thrilled by the potential of many instances of blockchain, like Bitcoin, as they expect them to be dramatic accelerants of our species, driving us past monumental challenges we have been working through for generations. This movement may perhaps be the single most important vehicle for change of our lifetime.
Investors, too, are excited by the prospective of digital currencies as well as crypto-assets. As the last few months have demonstrated to the market, with Bitcoin recently surpassing over USD $10,000, cryptocurrencies are bringing new light to the financial world. As a result, investors are flooding the crypto-market rapidly, creating portfolios, and getting involved in the community.
Whether or not you personally believe in the sustainability of the momentum, it still may be extremely helpful to familiarize yourself with the space. Of course, returns are extremely volatile and you should only invest at your own risk.
With so many novice investors making their way to the cryptocurrency world, there will be a lot of naive mistakes made. Here are 3 helpful tips, you can use, to avoid making beginner mistakes when crypto investing:
Join the cryptocurrency community
One of the most powerful things you can do as a newbie investor is join and provide value to the broader crypto community. Since we are still in the beginning days of the blockchain revolution, early investors are more than willing to give back and bring you up to speed, as they, themselves, are all in on spreading the movement as far and wide as possible.
There are many forums, youtube channels, and blogs built specifically to cater and cultivate this type of audience. It is likely best to try a few out, figure out which ones you like, and then really try and make a few strong connections. If you can find the right person, with legitimate credentials to prove their background, try and gain a mentor who will take you through everything you need to know to avoid making naive mistakes and, rather, manage serious returns. This can save you time and give you a better understanding of the technology. Finding an unbiased perspective, from someone who is not trying to sell you something, is extremely valuable and useful in making clear decisions. And in a space where everyone claims to be an expert, it is important figure out which advice you can trust.
Choose a secure and safe wallet
You will need a digital wallet to hold any type of digital asset. Your wallet will hold all of your important credentials, allowing you to store, send, and receive all sorts of cryptocurrencies. It is important you do your research before making your selection – aim for security, convenience, and low fees. Given the numerous reports of cyber-attackers being able to hack into unsecured online Bitcoin wallets, it is well worth your time to pick and choose the right one.
Most coins even have an official or standardized third party wallet that they recommend using to hold their currency. To find the best and most secure Ethereum wallet, for instance, you should ask around in the community but also read through the official Ethereum whitepaper.
Play the long game
Much like traditional trading, investing in cryptocurrencies is very much a game of patience. Success is a long game. Though greedy investors will tend to overestimate their forecasted profits or expect a quick turnaround on their money, they are likely in the wrong. If there is anything recent trends in the crypto-market have shown, it is that the nature of the returns are volatile and sporadic.
And while different coins are trending in different directions, there is no telling what the future holds. This is true, especially in the short term, as past coin returns are not directly indicative of future performance. While the wide open nature of the crypto-economy is enticing, given the diverse array of opportunities to be a first mover, there are very few proven heuristics you have at your disposal. It is a high risk, high reward world, but before you dive all in on, ensure you adjust for your personal risk tolerance to make the right decision.
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