How Not to Approach Crypto
|— Approaching cryptocurrency isn’t as simple as Googling which token to buy or listening to the guy on TikTok (even though he sounds like he knows what’s up). It takes a little more care and consideration before putting your money into a project.|
— The market is volatile, it takes experience and nuanced understanding. Be careful of panic reacting to the market if it moves surprisingly.
— Don’t put in what you can’t afford to lose – and don’t go into debt if you think you might profit on a project. It’s an extremely risky move and isn’t worth the hard lesson if you’re still new to the industry!
— Have fun learning, it’s an exciting industry. Start small, enjoy seeing profits and learn from any potential losses. Remember: The more you know, the more your money might grow!
Learn how to approach crypto by know how NOT to approach crypto.
Approaching cryptocurrency. It’s simple right? There’s so much information available online and the resources are intuitive enough. Heck, the guy on TikTok even knows what’s going on in the market, it’s got to be easy enough to turn a quick profit, right? Right?
Riding the rally and pulling profits sounds like an absolute dream, and we get it! It’s a new industry with so much potential for either making money or helping a fantastic project get off the ground. And with thousands of projects, opportunity abounds! But googling “the next massive cryptocurrency project” might be tempting, yet it isn’t your best bet. And the guy you heard talk about crypto with so much confidence doesn’t necessarily have any of the expertise to back up the conviction.
So to know what to do, you’ve got to know what not to do. Give the following quick tips a read about what to steer clear of when investing in crypto.
Avoid the following when approaching cryptocurrency
Trading reactively because things are moving
Okay so you might have read that crypto is a little volatile at times. It’s true, it can be. (Okay fine, it can be a little more than a little volatile.) And because of this volatility, seeing your investment fly high or sink deep can be enough to make you make an immediate move and act reactively.
But make sure you leave panicking for the disco and out of your crypto investment! Panic buying or selling won’t help you in the long run and will likely just stress you out. Just keep calm and remember the market moves in both directions.
Buying on speculation not fundamentals
When users are proclaiming that a certain asset is going “to the moon” all over Reddit, we know it might be tempting to dive all in and buy before The Surge™. Remember, again, the crypto markets are volatile, making it pretty difficult to predict the future of the price – long and short-term.
So be careful of jumping on board when the Speculation Train leaves the station.
Looking at the fundamentals is an approach that takes the “intrinsic value” into consideration. It looks at a number of different factors like the use cases of the technology, development potential, investors’ background, how many wallets are active, the transaction volume (how much cryptocurrency is being transacted on average), the technical elements like the amount staked or total value locked, and other metrics. These give you a much better insight into the possible direction in which a cryptocurrency’s value might go.
It’s important to remember not all experts and gurus know the nuances, and many things can offset the price. This leads us to…
Following crypto TikTok Instafluencers
Don’t get us wrong, there are a couple of genuinely insightful people on social media who have some idea of what’s going on in the crypto market. But hold out before fully trusting self-titled cryptocurrency advisors who use social platforms like TikTok, Instagram and Discord to instruct and guide in the world of digital trading.
We know what you’re thinking. But, but they’re there to help, aren’t they?
Certainly, some of them are genuinely looking to offer sound advice. But some of them are either not as clued up as they seem, some are there to try and influence you to a particular project to inflate the price or (an important OR) they’re using social media to con you. Or, in the case of Elon Musk, they’re hyping something to the nth degree without anyone really knowing why. Just take a look at Dogecoin’s value over the past few months to see how much one tweet every so often can impact the price.
Just make sure someone has a credible reputation before taking their word as fact. You’ll be able to get some idea of their legitimacy by the response from other community members.
Following the herd without a second thought
“If everyone is buying this particular cryptocurrency, it must be a good idea” is a dangerous trap. While exploring a cryptocurrency because it’s popular isn’t a bad idea, approaching a project without doing any of your own research can lead to trouble. There are thousands of projects with a following and a fanbase but not necessarily a function or a future and investing blindly – and leaving critical thinking at the door – isn’t a leap of faith that’s worth taking.
Going into the red in hopes of cashing in on the green
If the golden rule of cryptocurrency investment is “don’t invest what you can’t afford to lose”, the platinum rule is “don’t take out a loan for funds to trade”. Getting into any debt to start investing or trading in cryptocurrency is a dangerous business – especially if you’re just getting into the industry.
Think of crypto investment a little like learning to swim: If you start diving into the deep end, someone’s probably going to have to jump in to help you. Dipping your toes in and getting a feel for the market is a safer strategy and can save you significantly while you learn the ropes.
Trust us, the high risk – high reward approach works just the same later down the line and it’s not worth going in aggressively before you’re familiar with different elements in the market.
PS: please please please don’t use leverage if you’re not experienced.
But also don’t lose hope – the market is an exciting one!
We know it might be a little overwhelming with all of the many (and we mean many) projects available out there. Luckily, with all things in life, the more you get to know the market, the better your choices will be. By leveraging authentic information from reputable and trusted sources, you can make informed decisions without getting swept up in the hype.
When it comes to your research and insight, steering clear of biased information is a great way to make sure you’re getting the facts and not the fanfare.
And remember: Knowing what to avoid is just as important as knowing what to look for. Keep your eye on the prize, go in slowly and safely!
Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video Can We Go Decentralized?
*Please note this article is for educational purposes and does not constitute any type of investment advice