Bitcoin and other cryptocurrencies have helped create a new market for investments and a lot of people have been deeply interested in doing so. Last year, that interest went to extreme level and found backers in the mainstream media as well, as even someone who had no interest in either the technology or investing, started to get involved in order to make some easy money.
A lot of people touted these cryptocurrencies as being high-risk investments, but it did not stop people from heavily doing so and adding them to their investment portfolios. Cryptocurrency also found naysayers in its lack of a complete regulatory framework that has not been able to keep up pace with its rapidly increasing industry.
As per Niv Borsuk, the cryptocurrency market provides a unique challenge for investors, as they have to keep in mind a few variable that can influence their values. For example, restrictions imposed upon cryptocurrency may result in its value declining in less than a day. Despite offering a lot of advantages in comparison to the traditional currency and exchanges, investors need to sort out the best options from a sea of them. In order to help you achieve that, we have listed below a few things that we believe can help you make an informed decision:
Doing proper research
Before investing in any cryptocurrency, you will have to make sure that you properly research its history and existence. There are many cryptocurrencies out there that are fake and thus, you will have to search the internet in making sure the one you are investing in is genuine. For example, if they have a LinkedIn presence and the people behind them are experienced then it is probably a safe bet. Furthermore, you should also look for cryptocurrencies that offer unique solutions to a real problem and that they are not copying something that is already being provided in a better way.
Expecting realistic gains
There is a big misconception about cryptocurrencies being a very high-return investment. In some cases yes, gains can be phenomenal but more often than not things can go bad as well. So, your strategy in investment should not revolve around such a philosophy and thus you will have to be realistic. It is also advised that some of the good returns you get, you should consider investing them elsewhere.
It is advised by many experienced investors to treat cryptocurrencies as high-risk investments. The portfolio should also be diversified to minimize the risk of loss and only around 10-20 percent of it should contain investments in the shape of cryptocurrencies. Additionally, what you are investing is important as well and therefore, new investors should only look towards the more reliable names such as Bitcoin, Litecoin etc.
Keep track of your gains and losses
Cryptocurrency is yet to be considered a ‘real investment’, thus the assertion that capital gains are not applicable. However, it is important to be aware of how good or bad your portfolio is and thus the need to keep track of your losses and gains.