Sensible tips to start investing in cryptocurrencies

There are now thousands of different digital currencies, each with their own range of uses and chances of success

Sensible tips to start investing in cryptocurrencies. Source: shutterstock.com

The possibility of big profits has encouraged many investors to look into cryptocurrencies for the first time. This is an exciting type of investment, but there are some important points to bear in mind before you get started.

Choose a currency

Most people have heard of Bitcoin and maybe a few other leading cryptocurrencies like Ethereum and Litecoin. However, there are now thousands of different digital currencies, each with their own range of uses and chances of success.

You should consider whether you want a more established coin or one that has been recently launched and may have a bright future ahead of it. New currencies are often launched through an initial coin offering (ICO) and the most high-profile in 2020 include Sapien and LUKSO.

Find a coin that suits you or diversify by investing in several different cryptocurrencies at once. Either way, it is important to look into the token fully and understand what it offers.

Look ahead instead of back

It is easy to be swayed by the huge gains made by cryptocurrencies in the past. Bitcoin is the best example of the spectacular rise of these tokens. If you had put $1,000 into it in 2013, it would have been worth over $6,000 some five years later, even after a price fall.

Historical data can be useful when assessing some types of investment. But with cryptocurrencies, the huge levels of volatility mean that you should concentrate far more on future predictions. Find out what new markets it may move into, what partnerships are planned, and any other relevant information.

Be aware of scams

It is no secret that the world of cryptocurrencies isn’t free of scams. These range from ICOs that never actually take place to pyramid schemes and people who take money off investors with no intention of delivering tokens.

Check out the latest news and expert opinions on any token or service that you plan to use. You shouldn’t just take any offer or advert at face value. Remember that some celebrity endorsements of ICOs have been classed as fraud due to them breaching securities guidelines.

Consider a CFD

A contract for difference (CFD) can be an extremely useful way of getting involved with cryptocurrencies. The leverage offered and the volatility of these contracts means that you can make big profits if you correctly predict the future price movements.

To make this investment, you should rely on a good CFD broker. Look for a broker that is properly regulated, has low fees, and offers an intuitive platform that is easy to use. A high level of support is also preferable.

"Ethereum cryptocurrency price graph char

Consider a CFD. Source: Flickr, by wuestenigel

Only invest money you can afford to lose

Cryptocurrencies are regarded as being among the most volatile types of investment around, as huge price swings can occur in very little time. This means that you could either gain or lose a lot of money in very little time.

You should never invest money in this way unless you can afford to lose most or all of it, in the case of the price collapsing. There are still many unknown factors around this area that could affect prices, such as emerging legislation and new technology.

If you go about it in the right way, cryptocurrencies offer a thrilling and potentially rewarding type of investment. But it definitely isn’t something to rush into before getting fully informed.

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