Over the past few years, the cryptocurrency industry has exploded. The value of many cryptocurrencies skyrocketed, as did the amount of news coverage that the industry got in both technology and finance spaces. All of that news and growth have led to millions and millions of people across the world becoming interested in bitcoin trading.
While some will just keep up with the news and do a little reading, others have decided that they want to start investing in the space. However, before you dive in headfirst and invest thousands in Bitcoin or another favorite cryptocurrency of yours, there are some things to consider. This article is going to pose to you 5 questions that you should ask yourself before deciding to become a crypto investor and trader.
Do I Have a Plan?
The first thing to ask yourself when deciding whether or not to be a crypto trader should be if you have a plan. If you go into any investment, especially in crypto, blindly, you risk losing a lot of money.
This plan can include everything from knowing which platform or exchange to use, as well as knowing when you want to enter and/or exit the market. You should also do a lot of research on the industry itself, and put a plethora of time into deciding which crypto assets to invest in, and how much to invest. However, just because you have a plan doesn’t mean things will always go according to it. So have a plan, but also be flexible and aware that the industry is relatively new, and anything could happen.
How Comfortable Am I With Risk?
Next, you need to examine how comfortable you are with risk. While all investments carry a sort of risk, the cryptocurrency space takes this risk to the next level. Some cryptocurrency can often go up or down by multiple percentage points in a single day. You could wake up and see your asset worth 11% more than it was last night, only to see it down 7% by the time night comes around.
That is more movement than many other investments will see in months, let alone in a few hours. While you can certainly win big in cryptocurrency, you can also lose big. This can be very stressful for some people, so you need to be sure that you are ready for that. Also, if you decide to invest in crypto, be sure to only invest money that you can handle losing. Investing your life savings in such a risky space could have dire consequences if your chosen cryptocurrency doesn’t find success.
Am I Willing to Keep Up?
The cryptocurrency industry is still relatively new, and therefore, it is constantly changing. As a result, there are many new developments coming about and news that you need to keep up with. This could be the creation of new platforms, new laws being put in place, partnerships being announced and so much more. If you want to have the best chance of finding a diamond in the rough or selling an asset before the ship sinks, you need to check the news in the industry daily.
It is also important to keep up with public opinion and trends. While it shouldn’t influence your investing, it is a good idea to get an understanding of what those in the market think. If you are not willing to keep up with the news and new developments to learn more about the space, investing in crypto might be not right for you.
Do I Know How to Choose the Right Investments?
Another thing to ask yourself ahead of making an investment is whether you actually know how to choose the right cryptocurrency to invest in. Some of these investments have made people millionaires, while others have cost them a lot of their hard-earned money. So how do you choose which is the right investment?
Well, it requires a lot of research. You need to investigate the technology or idea behind the cryptocurrency, the team that created it, what their future plans are, their competitors, and other pertinent information. While there are no “sure things” when it comes to investing in crypto and anything can happen, doing the research can generally help individuals make more sound investments, based on stats or data, rather than a gut feeling.
Will I Be Able to Spot a Scam?
It would be great if all cryptocurrency-related opportunities and investments were legitimate, that unfortunately isn’t the case. There are hundreds of cryptocurrencies, ICOs and blockchain platforms that are either predatory in nature, or a full on scam. Thankfully, there are some warning signs of a fraud that you can watch out for.
These include making unrealistic claims, having a lack of technical or background information, being secretive about their team, promising unrealistic returns. Some are even similar to Ponzi schemes and pump and dumps. If you feel uneasy about a crypto asset, ICO, or cryptocurrency, it is a good idea to leave it alone.
However, it is important to keep in mind that not all scams will have these telltale signs. Crypto scams have cost investors millions, and many do a good job of making their opportunity look realistic, promising, and lucrative.
If you aren’t sure of your ability to spot a scam, it’s probably not wise to invest in an industry that has a fair share of them. Of course, that is unless you plan to invest in some of the big names in the space like Bitcoin, Ethereum, and others.
In conclusion, we hope that this article and the questions covered in it have been able to help you decide whether or not being a crypto trader is right for you.