By James Yeo
For the past two years, Bitcoin has been the talk of the town for its meteoric rise in value. Its price has soared around 1,000 per cent in just the past year from just US$700 to around US$7,000 at the time of writing.
Needless to say, there is growing interest among investors to invest in this digital currency to capitalise on the next big thing. However, if you are a newbie in the world of Bitcoin, we have come up with some useful tips for you:
1) Find a reliable broker
There are so many cryptocurrency exchanges available for traders and investors, but finding the right broker is not easy.
Based on your requirements and expectations, various factors come into play when choosing the desired exchange. For example, if you are investing for the first time, make sure you find a broker that allows you to deposit money.
Most exchanges verify your account before depositing your funds. Therefore, try to find an exchange in your country first to convert the cash from your bank into digital currency. Some examples include Coinbase, Gemini and CoinHako.
After that, you need to sign up for another brokerage that offers a wide variety of coins because many exchanges offer just a few coins, mainly Ethereum and Bitcoin. Thus, look for the exchanges that have diverse options available as it gives you more flexibility to expand your portfolio.
Moreover, aim for exchanges with high liquidity as it will represent a market where there are a large number of buyers and sellers to allow you to buy and sell easily.
For more information, you can check out this post from Masterthecrypto.com as it looks at other important factors for you to consider, too.
2) Define a strategy
Even if you are a newbie in the cryptocurrency market, there is a simple rule every investor is aware of, i.e., to have a clear strategy.
To manage the risk effectively, it is important to devise a strategy. Are you looking to buy and hold cryptocurrencies for the long term or are you planning to trade in and out for quick gains? Answering the question will dictate vastly different approaches.
There is one more thing here. Given the huge volatility of cryptocurrencies, it’s probably wise not to dump all of your fortune in it. We would advise allocating only a percentage of your financial assets that you are prepared to lose totally (yes, huge risks = huge returns).
3) Understanding digital currency wallets and 2FA
To enter into the world of bitcoin, you need a virtual wallet. It is an application that can be downloaded on your smartphone or computer.
However, what many people do not know about are the cryptocurrency hardware wallets. These are small devices that you can plug into your phone or PC. It creates your private key when your device is offline, which doesn’t allow your account to be hacked into. Some examples of hardware wallets are Ledger Nano S and TREZOR.
I have also read many sad news of how investors lost all their money due to hackers. Thus, I highly recommend adding another layer of security, called ‘Two Factor Authentication’ or 2FA.
2FA is a two-step verification that not only asks for the username and password, but also the password coming from the user’s smartphone. It helps to mitigates the possibility of identity theft and safeguards all your digital assets.
4) Understand ICOs
Last but not the least, you may have heard of Initial Coin Offerings (ICOs) as you start to invest in Bitcoin. ICOs have gained massive popularity in 2017 as it raised over US$2 billion within just one year! Millions of investors who have missed out the huge run in Bitcoin are now trying to jump into the cryptocurrency craze through ICOs.
So what exactly are ICOs? They act like a mechanism wherein people raise funds for their project or business by selling underlying digital tokens in exchange for Ethereum or Bitcoin. It is similar to Initial Public Offerings (IPOs) where companies sell shares to raise funds.
That said, there are still many differentiating factors. In ICOs, coins are sometimes sold by businesses that have not even developed their products yet and only a proposal of how the thing will work out.
As such, you are literally betting on they are betting that the project will become successful when you purchase these coins.
To sum up, investing in Bitcoin and/or cryptocurrencies is a different ball game from investing in the traditional avenues like stocks and bonds. By following these tips and information, you will find yourself in a better position to start maneuvering in the crypto-space.
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