Among bitcoins growing notoriety on wall street and the dogecoin in Canadian television, cryptocurrency is reaching a bigger audience than ever before. In particular, growing prices are tempting for beginners, but they should exercise caution and be mindful of the risks before buying.
So if you are new to crypto and have been thinking about if you should invest or not or want to learn more on how to buy dogecoin in Canada, below are seven things you need to keep in mind before you do anything.
Don’t invest more than what is affordable to you
Compared to many other investments crypto is much riskier. The only thing guaranteed is volatility. In addition, it's also unregulated, in most cases. For example, FDIC insurance is not existent and a buyer of last resort also does not exist.
Crypto coin prices change drastically from second to second. So don’t spend your life savings on any coin or place a bet on a proverbial farm.
Do your research properly
Before investing large amounts of money in any kind of digital currency, take some time, a lot of time performing research on the technology, so that you can be aware of the risks and have an understanding of the value proposition.
Read all the content you come across on the topic. Join developer mailing lists and community forums, tune into podcasts. Use books from the library. Don’t just read about digital currency also study related fields like economics, game theory, and cryptography.
If covid -19 is no longer on lockdown, attend local meet-ups in your location. If some of the things you are hearing don’t make sense, don’t be shy to ask someone to explain. If you’re still in the dark, don’t make the mistake of assuming it's you, the people talking could be discussing gibberish.
But those who are genuine will invest time to help you gain a better understanding. However be alert, avoid people who talk about their book. In other words, people who tell you to purchase content they own so that the prices increase.
Even if they sound convincing, find an objective view and alternative arguments. Once you have gone through all your research objectives, there’s a lot more to do still.
Oppose the fear of missing out
If the purpose of your investment pursuit is to avoid missing out, then the chances are high that you may lose everything.
The fear of missing out is one of the best ways to lose whatever wealth you have gained over the years.
This is because a gut reaction to something that should be researched initially is not rational. In other words, trading based on your gut feeling will “upset your stomach” very quickly.
So be aware of what you are buying, knowing that very well is an important precursor. For example, registering an account on a trading app and noticing that the currency is up by 40% in the past 23 hours is not research. It could just mean that you’re the unlucky person being sold a dropping cryptocurrency.
All coins have pumpers including bitcoin. Don’t let pressure engulf you. Evaluate the case to make an investment based on merits and not impulse and think about what and how you stand to gain.
If it appears too good to be true, it certainly is
Just like the US Congress, Wall Street, or the America Bar Association, crypto is a rough political game. There may be contenders who promise people that their project will lead or overtake bitcoin. To know this for sure, you will need to conduct research.
Both buyers and borrowers need to beware. Some cryptocurrency exchanges provide more than 100x leverage which means you can borrow close to 99% of the total cost of the investment. This will spruce up your profits if a coin's value increases but if the value of the coin goes down, you could be wiped out quickly.
Verify, don’t trust
There are many scammers in this market. Scammers impersonate celebrities and instruct their victims to send little amounts of crypto to verify their addresses. They say that if they do that they will get 20 times their money back. When the proposition is too good to be true, that’s a big red flag.
Be on your guard for unit bias
Not all coins are created the same, just because a coin is trading at $2 today, doesn’t mean it is more affordable than bitcoin at $60 000.
There exist hundreds and thousands of cryptocurrencies, some of them try to copy bitcoin, and some attempt to solve other matters. They all have different degrees of decentralization and developer support.
Establishing the worth of the coin entails asking how and why the coin was created. What is its assumed utility? Who are the people working on it? How huge is the developer community?
Just like a building, a codebase demands maintenance, and neglecting it can leave a structure unsound.
What’s even more important, is the coin's proof of stake, proof of work, or security model that matters. If we look at the proof of work, you need to find out how the hashrate compares to other PoW coins.
Don’t obsess about the price
Have some fun, get some exercise, fresh air, sunshine and spend some time with family. It's possible to strike a balance and still invest in cryptocurrency.
Markets fluctuate from hour to hour, minute to minute, day to day, but any investment worth your salt is worth a long-term bet.
So what’s one of the best ways not to obsess? It’s utilizing dollar-cost averaging. Purchase a fixed dollar amount of whichever crypto you desire at regular intervals, you can do this annually, weekly, daily, or monthly, just pick an interval you won’t obsess over.
If you have a long-term outlook, you won’t be pressured to take up your position or sell based on short-term movements if you make use of DCA.
The aim of this article is not to frighten anyone away from this transformational and fascinating field, the information here is to open your eyes and make you aware of the risks and opportunities involved. So you make better decisions going forward.