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In the wake of PayPal’s major announcement that it will soon be hosting the likes of Bitcoin, the cryptocurrency market is really overheating.
The prices of Bitcoin and various altcoins have undergone significant increases in value following the news of PayPal’s arrival, with Bitcoin itself bouncing to a three-year high.
In early 2021, PayPal intends to allow users to buy, sell and make purchases using a small selection of cryptocurrencies, opening the door to mass adoption and the potential for cryptocurrency to experience a significant increase in the volume of investors embracing. the coin .
With this in mind, more investors are looking to embrace the wild and often erratic world of cryptocurrencies and dip their toes in the water ahead of the new wave of PayPal investments.
But investing in cryptocurrencies is an entirely different proposition than stocks and shares – and pretty much any other form of asset investment for that matter.
So, let’s explore six key things to keep in mind when buying cryptocurrencies like Bitcoin and Ethereum for the first time:
Cryptocurrency: Understand your market cap
With cryptocurrencies, there are many mysterious processes that drive sentiment, speculation, and investment that even the most seasoned investors don’t understand. However, coin market capitalization is one of the most effective things to learn in order to get a better overview of which coins are worth investing.
In essence, market cap, also known as market cap, shows the size of a coin and the metric is calculated by taking the value of the coin and multiplying it by the number of shares available.
Market caps provide an overview of the level of risk each investment represents, which is why it is so important to check the capitalization of a coin before investing in it.
Coins with high market capitalization and higher circulating supply are, in theory, less vulnerable to the wild volatility that other tokens may experience. However, smaller market caps are more prone to wild price swings and are more vulnerable to being manipulated by large holders.
Embrace volatility
One thing you are probably already aware of is the fact that most cryptocurrencies are susceptible to high volatility. The price of Bitcoin, for example, can go up and down by thousands of dollars in a very short time.
This means that if you are embracing cryptocurrencies, it is important not to be bothered by the sight of your investments falling significantly before recovering quickly.
Most cryptocurrencies are influenced by supply and demand, which means that mass sales can cause a drop and mass adoption helps the coin grow. Coins like Bitcoin also respond to market news. If there is a positive emerging story about cryptocurrencies, prices are likely to rise dramatically, while news of regulations or market bans can drive prices down.
By training yourself to stay strong in the face of this volatility, you can save a small fortune by avoiding the temptation to cash in on your investments if you see them fall in a short amount of time before reinvesting in recovery.
Diversify your holdings
An investment tip that shifts well between stocks, shares and cryptocurrency is the benefit of using a diversified portfolio.
Investing in more coins that have an attractive future is a great way to protect your portfolio for the long term. You can invest in different sectors of the cryptocurrency landscape that suit different use cases.
Different coins serve different purposes, from the flourishing tokens of decentralized finance to privacy-protected coins, to coins with faster payment processing speeds.
There are many assets in the world of cryptocurrencies that can grow at different rates, and it’s definitely worth hedging your wallet to house several assets that outperform others.
Developer account and community activities
Coins associated with strong cryptocurrency projects tend to have high levels of development activity. One of the best ways to keep in touch with developer activity is to view their progress on GitHub.
Through GitHub you can see the activity surrounding a project and monitor the regularity of updates. You can also find out how many observers are tracking the progress of a project and how many forks have been created.
Having active developers is a great way to see how coins can develop in the future. If a token is backed by innovative developers, they are more likely to make a better long-term investment.
Likewise, if a coin is associated with an active community, it can be a safe bet to stand the test of time when it comes to investing.
Cryptocurrency – choose the right exchange for you
Choosing the right exchange based on your needs is another important thing to consider. While there are many reputable exchanges out there, not all of them list privacy coins like Monero and DASH due to their highly decentralized and private nature.
You will also need to consider the type of exchange you wish to use in the future. While there are some great places online like Coinbase to start your crypto journey, non-KYC exchanges like Evonax and Binance require less information to get started and allow you to create an account in seconds.
Learn the values of “hot” and “cold” wallets
Finally, it is important to know how you want to store your assets. Cryptocurrencies can be stored via offline “cold” wallets to keep your coins safe from potential security risks or “hot” online wallets.
Most investors prefer the ease of access offered by hot wallets, but if you are looking to invest more money over long periods of time in specific currencies, it may be worth making the purchase and keeping your coins in a cold wallet for make sure your wallet remains free from cyber attacks.
However, you choose to invest in cryptocurrency, making sure that your comfort in looking after your investments is paramount. Choose an exchange that suits your needs, try to get out of the market volatility and enjoy the ride. Investing in cryptocurrencies is a journey like no other.
Prepared by Patrick O’Brien.
About the author
Peter Jobes is a technology, cryptocurrency and blockchain writer who has worked with the Press Association and clients such as Tesco, RAC and HelpUCover. CMO at Solvid.
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