5 Things New Cryptocurrency Investors Should Know

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If you are a cryptocurrency investor or are considering investing in Bitcoin or Ethereum for the first time, here are five things to consider.

Build your knowledge of the crypto world

You own some Bitcoin or Ethereum, but now what?

Before trying to move on to more advanced cryptocurrency investments, do your research and understand what you are investing in. Take a long-term view and don’t go looking for quick and easy money.

The same advice applies if you are interested in staking, mining or crypto liquidity pools. You should never put your money into something you don’t fully understand.

Turn off the news

There are over 15,000 different cryptocurrencies, and it can get very noisy and confusing, trying to understand everything that is going on at the moment.

This is why educating yourself about cryptocurrencies and eliminating noise is so essential. Stay the course and don’t let the hype of certain cryptocurrency investments result in fear of losing (FOMO).

Keep a healthy dose of skepticism with influencer advice on cryptocurrencies and be on the lookout for strangers writing directly to you about get-rich-quick schemes.

Cryptocurrency investors are recommended to stick with the two most established currencies, Bitcoin and Ethereum.

When trading cryptocurrencies, keep taxes in mind

Another thing to keep in mind if you are a new cryptocurrency investor is taxes. Holdings in cryptocurrencies are taxed in the same way that other assets such as gold and stocks are taxed.

If you bought and sold Bitcoin, Ethereum or any other cryptocurrency, you must report any profits or losses on your income tax.

Be prepared for volatility

If you are a cryptocurrency investor, you are on a wild ride. Cryptocurrencies are notoriously volatile investments, and you will need to tolerate them as any new technology will experience growing pains.

It’s all the more reason for investors to play a long, steady game rather than trying to make a quick buck. If you’re in it for the long term, you don’t have to worry about short term swings.

And if you can’t handle it, your emotions will take over. If they take over, you can make an emotional decision around your money.

Investing based on emotion can lead to poor, impulsive financial decisions, which can hurt your long-term financial goals.

Just take a quick look at Bitcoin’s price history to see just how volatile it is. This is why cryptocurrency investments should not represent more than 5% of your total portfolio.

Protect your cryptocurrency investments

To protect yourself from hacks and scams, prioritize protecting your cryptocurrencies by implementing good digital security habits and heeding common warnings.

For example, avoid promises of quick money or any contractual obligations that prevent you from holding cryptocurrencies without being able to sell.

If you are trading more than a few hundred dollars worth of cryptocurrencies, consider getting a cryptocurrency wallet for added security.

There are two types of crypto wallets: hot wallets and cold wallets. A hot wallet stores cryptocurrencies online, while a cold wallet stores your cryptocurrencies offline on hardware.

If you put your cryptocurrency in a hot wallet, see if it has robust security measures in place, including two-factor authentication, allows for a portion stored in a cold wallet, and private insurance policies in case of theft or hacking.

You are given a unique key to access your wallet, which means you need to be extra careful not to lose your key or steal it. Avoid sharing your private key with anyone and keep passwords strong and regularly updated.

After today’s article, start by writing down your improvement points, make a plan and get started! The crypto world is for you too.

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