With the advent of cryptocurrency in the global financial market, the investors have got a new prospect for making investments. There is no doubt that cryptocurrencies have gained a considerable momentum in the market with consumers and investors taking a keen interest in them. We came across a myriad of articles and blogs on Reddit telling us what we should be knowing before making a crypto investment. So next time when you stumble upon phrases like ‘things to know before investing in cryptocurrency Reddit’ make sure you read this post.
Investing in a cryptocurrency seems like an appealing idea. With Bitcoin’s value increasing up to $19,000 in the last year, we can’t help but wonder what it would be like investing in a digital currency. Cryptocurrencies are potentially lucrative but they also come with great risks. It’s true that with great risks come great rewards but one has to be put everything into perspective before plunging down their hard-earned money into an extremely volatile investment.
While cryptocurrencies have the opportunity to offer significant returns over investment, the consumers, as well as the investors, must do their due diligence before investing in them. They need to have a sense of risk management as well as diversification in their investment portfolios before thinking of investing in a cryptocurrency.
Things to Know Before Investing in Cryptocurrency Reddit States
After going through several articles and information available on Reddit, we were able to gather some valuable information regarding investing in cryptocurrency. Below are some important things you should know before investing in cryptocurrency, Reddit states.
Know Your Goals
Before making an investment in a cryptocurrency, you must have a deep understanding of why you want to make this investment. You must know the exact reason why you want to invest in a cryptocurrency. If you have a propensity towards investing in a high-risk investment, that means you must have a proper goal in mind that you’d want to achieve in your lifetime. Whether it’s about making quick money or making a long-term investment in cryptocurrency, you must have your goals defined before you go about making the investment. It’s extremely important to know your objective first and then make a rational decision.
Carry Out Your Research
When you’re just a beginner, it may seem feasible to invest in a certain cryptocurrency after carrying out some basic research on the internet. However, we would not advise you to only rely on that basic information. Before investing in a cryptocurrency, you must do some due diligence by asking yourself these questions: who’s the team behind the cryptocurrency? Does it have a presence on the internet and social media? Did you review the company’s code base? Is it addressing a real problem? Does it offer proof of concept or beta? With this information at your disposal, you will be able to make an informed decision.
As you are already aware that cryptocurrencies are high-risk investments and can belong in any investment portfolio, therefore you need to act quite responsibly while dealing with them. It is advisable to only invest 10-20% of your investment portfolio in cryptocurrencies and keep it diversified in order to reduce risks. The more diversified your crypto portfolio is, the more you will be able to mitigate risks.
While some of the leading cryptocurrencies may guarantee complete security, you need to be vigilant while choosing the right blockchain company when it comes to managing your investment. Pick the company with a reputable team carrying out due diligence to keep your investment intact. However, when it comes to you, then you should be extremely cautious about not sharing your private key with anyone. Always use credible exchanges and wallets. If you want to consider moving your funds from the exchanges then you can rely on cold storage crypto wallets.
Keep a Track of Your Gains/Losses
In spite of being global, cryptocurrency is not classified as a real investment so many investors say that capital gains do not apply in this market. Irrespective of whether capital gains apply in this market or not, you should always keep a track of your gains and losses for your own personal information to find out how your portfolio is performing. Once most of the nations will begin regulating taxes of crypto-related capital gains, you would want to pay your fair share without having to deal with the CRA or IRS.