Know The Risks And Dangers Before Investing In Cryptocurrency

The lure of making a fortune has always been a crowd puller. While it was the gold rush in 19th century, the current craze is about cryptocurrencies. As compared to standard stocks, whose valuation is linked to a company’s performance and future potential, value of cryptocurrency is largely determined by demand and supply. It is also alleged that a lot of black money is flowing into crypto wallets, resulting in wide fluctuation in valuation of crypto currency.

As cryptocurrency investments are a lot more complicated, retail investors have a hard time getting a hang of it. This is especially true for investors who are exploring cryptocurrency investment for the first time. It is important that first-time investors understand the risks and dangers of cryptocurrency investment before parking their hard-earned money. Here are some key tips and recommendations to help retail investors make the best of their cryptocurrency investment.

Do not overinvest – It is true that value of your cryptocurrency investment (check more at : https://newspatrolling.com/can-paris-saint-germain-end-their-uefa-champions-league-curse-this-season/) can grow significantly faster than traditional investment options. However, it does not mean that you should put all your money in cryptocurrency. Please note that cryptocurrency valuations (know more at : ) are also known to fall rapidly from time to time. Invest only a portion of your money in cryptocurrency to diversify your portfolio and not to satisfy your greed. Taking big bets can be risky for retail investors.

Avoid panic selling during high volatility – Just like stock markets, cryptocurrency valuations often witness a high level of volatility. You need not lose your cool during this period, as panic selling will apparently lead to losses. After a few days or weeks when valuation rises again, you will regret for having liquidated your cryptocurrency investments. A strong mindset and willingness to hold your ground is the key to succeed in the world of cryptocurrency investment.

Diversify your portfolio – Various types of cryptocurrencies have cropped up in recent years. Some retail investors may be tempted to invest in newer cryptocurrencies, thinking that they have more potential for growth. That may be theoretically correct, but things may not work out as planned in real world.

“For most retail investors, it is recommended that spread your funds across multiple cryptocurrencies,” says Pankaj Bansal, Founder and CEO at Bigshoptree.com . Sharing his personal experience, Pankaj says, “My cryptocurrencyportfolio has blue chip coins such as Bitcoin and Ethereum, whereas I have also invested some funds in emerging cryptocurrencies like Dogecoin and Matic. A balanced approach helps reduce risks of cryptocurrency investment.”

Choose a reliable platform – The regulatoryenvironment for cryptocurrency investment is not properly defined and there are likely to be multiple loopholes in the system. This is why you need to choose a reliable platform to park and trade your crypto assets. Make sure that your investment will be safe even if new regulations come into force.

Do your own research – Cryptocurrency valuations fluctuate more when there are political-economic uncertainties. You need to keep abreast of global developments to be able to predict the movement of cryptocurrency valuations. Do your own research and avoid getting distracted by what your friends and acquaintances may have to say about crypto markets.

Last but not least, make sure you pay relevant taxes. Gains you make via cryptocurrency investment will be treated as capitals gains and taxed accordingly. If you do not understand the taxation part related to income from cryptocurrency investment, it will be better to consult your financial advisor. Do not ignore the taxation part or you may have to pay hefty fines.