How Not to Lose Money in Crypto
Home » Smart home » Gadgets » How Not to Lose Money in Crypto

How Not to Lose Money in Crypto

posted in: Gadgets 0
Cryptocurrencies are notorious for being volatile. And where there is volatility there is a huge opportunity to make and lose money. If you’re investing based on what a celebrity is tweeting or what a self-declared expert tells you to do, then there’s a good chance that it will cost you. So here are 10 simple rules for you, to help understand what are the common mistakes you should avoid, to be smarter with your money.

1. Don’t blindly follow “experts”. Always do your own research

You will find crypto “experts” in every nook and cranny of the Internet. You may find this hard to believe but there are no real crypto experts. Cryptos are too volatile for anyone to be able to accurately predict their prices. So, do your own research.

2. Don’t get into low liquidity cryptos. You could get stuck badly

Liquidity is the ease with which a crypto can be bought and sold. If a crypto has low liquidity, you may not be able to sell it easily when the right time comes. And instead of making a profit, you will end up stuck with it.

3. Don’t try to “time” the market

When you look back in time everything seems very logical and obvious. You may regret not having bought Bitcoin at $1,000 or not having sold it at its peak. This regret will get you nowhere. Do your research and if you feel that a particular crypto is undervalued, then buy it. Or if you think it’s overvalued, then sell it.

4. Buy the rumour, sell the fact.

This ideology works in most financial markets. Let’s say a particular crypto project is expected to announce some game-changing new features. When you first hear of this, buy the crypto. As more people start hearing about this, the price will keep rising. When the actual implementation of the feature is announced, suddenly the price will fall! Why? Because the early buyers will sell and book their profits. A word of caution – make sure the rumour is based on reality!

5. Don’t play with derivatives unless you are a pro

Derivatives are financial instruments that derive their value from some asset e.g. interest rates, crypto prices, etc. Futures and options are common types of derivatives that were designed to reduce risk and hedge against uncertainty. But in the wrong hands derivatives are a recipe for financial disaster. So don’t play with derivatives unless you really know what you are doing.

6. Don’t buy NFTs unless they give you some exclusive rights

Non-Fungible Tokens (NFTs) are the rage nowadays. We hear of pixelated graphics being sold for millions. Don’t fall for this hype. Unless an NFT gives you some exclusive right, it is worthless.

7. Never short Bitcoin. Never

Shorting or short-selling is when you sell crypto you don’t have in the hope that its price will crash. Never short Bitcoin. The crypto industry actually has a term for an investor who goes bankrupt by short-selling Bitcoin – Ashdraking.

“Lord Ashdrake” was a Romanian Bitcoin trader who made a ton of money shorting Bitcoin. And then he shorted it at $300. Bitcoin zoomed to $600 in a few weeks, and Ashdrake went bankrupt.

8. Don’t leave your cryptos on an exchange

There’s a saying in the crypto world – “Not Your Keys, Not Your Coins”. When you keep your crypto in a centralized exchange, you don’t really have any control over it. If the exchange gets hacked or its owners vanish, you lose all your crypto! So always store your crypto in your own wallets – paper, hardware, or software.

9. Learn to use wallets – paper and HD

If you accidentally delete your mobile banking app, do you lose your money? No. You can simply re-install the app. That’s because your money is held by a bank. Crypto is very different. If you delete your crypto wallet without backing it up, you will lose all your crypto! So, learn how to use crypto-wallets – paper, hardware, and software.

10. Read the Future Money Playbook before you start investing.

Crypto investing is not simple. There are a lot of technical and financial issues that you have to learn first. I’ve written the Future Money Playbook just for new investors. It’s a free download, so make sure you read it before you invest in crypto.

Source link

Leave a Reply