When planning to invest in cryptocurrencies, or specifically in Bitcoin, users tend to have many questions. This is a good sign, meaning that a person is not taking the matter lightly. Like making any large purchase, from a couch to a stock, people should, and often do, feel obligated to be prepared.
Cryptocurrencies are a pretty popular investment right now. There are several steps people should take before and after investing in any cryptocurrency, including Bitcoin.
1. Do your research
This is the most important step. The more you understand, the better you will do. Investing in Bitcoin or other cryptocurrencies is attractive and an opportunity one wouldn’t like to miss, but users should act responsibly and do their research first. They should get to know the technology it is based on, its most important concepts (like exchanges, wallets…) and of course, they should choose the appropriate cryptocurrency.
2. Be careful
Responsibility becomes even more important when users actually start investing. Risks are inherent to any type of investment, including cryptocurrencies. The best advice a user could get in this phase is not to invest money they couldn’t afford to lose. This means always being aware of your balance, opportunities and possibilities.
There is no universally good timing for investing in cryptocurrencies, but there is some available advice. Users shouldn’t invest when the value of a cryptocurrency is at its top (“a bubble”) or when it’s crashing. The best time for investment is when the price is low but stable. This probably means it will soon rise again, bringing profit to users. This may sound like a simple rule, but users need the experience to judge if the cryptocurrencies are actually in a bubble, crashing or stable.
Experienced users advise not to keep funds on an exchange. It is okay use one for making the investment, but after that, users should store coins in some type of wallet. There are several wallet options available – software, hardware or a paper wallet. They differ in how they are used, the security they provide and platform compatibility (iOS, Android, Windows…). When a user invests, it is solely their responsibility to keep the coins safe. Losing a phone or experiencing a computer crash might lead to a loss of coins. This means always having a backup (copying a wallet file, printing out private keys).
The community surrounding cryptocurrencies has tons of advice about investing. Part of a user’s research should be learning from the more experienced users and their mistakes, before making their own.