Do you think that cryptocurrency has the potential to be your next investment that produces returns? If so, more people than ever are beginning to share your opinion. The most common reason for investing in cryptocurrency today is the potential for long-term returns.
However, you can’t just jump into the crypto market and expect to see great results.
You need to understand some important things before investing in crypto. Keep reading to learn every step you must take when purchasing crypto.
Learn the Basics
Learning what cryptocurrency is will be essential to your cryptocurrency investing journey. You aren’t buying a stake in a company as you do with stocks. You’re buying another currency that’s the store of value for new technology.
If you don’t understand the technology you’re investing in, how do you know you’re making the right investment choice? While some coins like Bitcoin and Ethereum are established, others do things differently and take a different approach.
If you want to branch out and diversify your holdings, you need to understand why it makes sense to invest in those tools. Learn everything you can about why a cryptocurrency is worth investing in before purchasing.
Determine Your Investing Strategy
The next step to learning how to invest in crypto is to figure out how you want to invest. Like traditional investing, you can do this in a few ways.
Dollar-cost averaging is one of the most popular ways for regular investors to invest in something. You don’t swing trade or throw all your money into a few investments. Instead, you set aside a small amount of money every month to put in a market.
Doing this allows you to get price exposure at different pricing levels. You don’t have to buy the top or bottom prices in a market cycle. You have exposure to them all.
This method is also less stressful than other investing methods. In most cases, you don’t have to pay attention to the market since you will keep everything you buy for an extended period.
Swing trading is a short-term strategy where you take advantage of market fluctuations to make a profit. Your goal is to buy Bitcoin or another cryptocurrency during a downward trend and sell it when it goes high again.
You can do this in many timing windows. More ambitious traders will trade several times an hour, while others will make a few trades per week.
Whatever method you choose, you’ll need to keep an eye on the market to know when the best trading windows are.
Find an Investing Platform
Once you know what coin you want and have your trading strategy, you’re ready to take the next step and buy your cryptocurrency. However, you can’t just sign up for a stock trading app to find all the coins. You need to sign up for an investment platform.
Many cryptocurrency platforms are available, but not all are well known. Try to stick with the established players when you start to avoid falling for scams.
Once you sign up for an account, you can find price information for the coins you want to buy. Deposit your money and put an order for the cryptocurrency you’re buying.
Of course, the leading platforms may not have smaller coins that haven’t established themselves yet. You will need to sign up for smaller platforms to access those coins. Just be careful what information you provide.
Learn Your Tax Implications
You can’t profit from cryptocurrency and not pay taxes anymore. Now that crypto is mainstream, governments want their cut of profits made in the market.
Unfortunately, learning how to handle taxes with cryptocurrency earnings isn’t well-documented. Do your best to learn how to handle taxes based on your government’s rules.
There are several software programs that will help you with the process. You can export your exchange transactions into these programs, and they’ll tell you what you owe the government.
If you don’t feel comfortable doing this yourself, you’ll need to reach out to a tax professional. There are now many accountants experienced with cryptocurrency taxes who can help.
Store Your Holdings
If you plan to hold long-term, you don’t want to store your holdings on a cryptocurrency exchange. While this may be convenient and doesn’t require much effort from you, it does carry risks. What happens if the exchange you’re using goes under or gets hacked?
In those situations, your holdings are at risk.
Holding your cryptocurrency on a private wallet will ensure nothing happens to your holdings. Nobody can access or take your holdings if you store your private key and seed phrases.
Learn When to Exit
Making a profit in cryptocurrency isn’t worth much if you don’t take any of it out of the market. Yes, you will likely hold long-term if you’re serious about cryptocurrency. But that doesn’t mean you can’t gradually withdraw your profit over time.
Don’t be afraid to withdraw money if a coin you buy drastically goes up and increases the value of your holdings. Things will usually go back down after a significant price increase, so you can always re-invest at a lower price point in the future.
Doing this ensures you don’t have as much risk and can take advantage of your earnings.
Do Your Research Before You Invest in Crypto
You’re taking a risk when investing in an asset like cryptocurrency. There is much more to consider than normal stocks, so you need to learn everything you can when investing in crypto.
The guide above is the best place to start when you start your investing journey. Make sure you read it and understand everything before you buy crypto in the future.
Read more posts on the blog if you want to learn more tips that will help you make better investments.