One of the golden rules of investing is “don’t invest if you can’t afford it yet.”
It’s a solid principle to base your investment preferences on, especially if you intend to invest in cryptocurrency.
Unlike fiat currency, cryptocurrency is still largely unregulated, making it less stable and riskier. Sure, it can be a quick way to earn big bucks, but you can lose that profit just as quickly if you’re careless. That’s why taking out a loan for crypto investments is generally not a good idea, especially if you’re an amateur investor.
While it’s tempting to do so when seeking to capitalize on potential gains, you must consider the risks and create safety plans for minimizing unfavorable results. However, if you still want multiple loans for high-risk ventures, borrow only those you can combine into a single loan. This option simplifies the repayment process and usually offers lower interest rates.
Aside from loan-related risks, many other factors should be considered when investing in cryptocurrency. In this article, you’ll learn more tips on safely investing in cryptocurrency.
We want to emphasize that cryptocurrency is the one of available payment options for purchasing vouchers, prepaid and gift cards at Baxity Store. The platform ensures the complete safety of your personal data, operates without any hidden fees, and offers high-quality technical support to address any issues.
5 Safe Crypto Investment Strategies
Here are five tips on investing in cryptocurrency safely:
Research First
Con artists don’t have a one-size-fits-all approach to persuasion. They often use influence strategies tailored to target their victims’ psychological weak spots. Do you have an appetite for high-risk activities? If so, crooks might capitalize on your self-confidence to persuade you to engage in risk-averse investments.
At the same time, if you’re experiencing financial constraints or just plain tired of your “9 to 5 job,” they might dangle the prospect of wealth and quick profit before you. Whatever situation you’re in right now, remember to check the background of an individual or a firm promoting lucrative crypto investment opportunities.
Here are some reputable sources to consider when researching brokers and other investment representatives in the United States (U.S.):
- For investment advisers: The Investment Adviser Public Disclosure (IAPD) website offers information regarding investment adviser firms registered with the SEC (Securities and Exchange Commission) and most state-registered firms.
- For brokers: The Financial Industry Regulatory Authority or FINRA has a BrokerCheck website containing details regarding a broker’s background and qualifications.
In the United Kingdom, you can visit the Financial Conduct Authority’s (FCA’s) official website instead. The FCA is a financial regulatory body in the U.K. (United Kingdom). Some countries like the U.S. also let you search for information regarding individuals or groups of individuals who were defendants in court trials or participants in administrative procedures. The bottom line is to research first before you invest.
Err on the Side of Caution
Don’t invest in crypto just because everybody else is doing it. Trendy phenomena tend to attract scammers and fraudsters. These crooks prey upon the novelty of an investment opportunity, especially if there’s a lack of history, hence, a lack of cautionary tales surrounding the product.
Here’s a rule of thumb: if the claims are too good-to-be-true, it’s likely a high-pressure sales tactic.
The reality is that cryptocurrency is risk-laden, volatile, and exceptionally speculative, so it’s better to err on the side of caution than to give in to promises of guaranteed returns.
Set and Protect Your Margin
Unlike trading, investments, including cryptocurrency, are often long-term commitments. Early investment can give you more time to grow your capital and build wealth. However, it will help you greatly if you know your financial “margin” and commit to maintaining it.
Think of that margin as a “breathing space” for your investments. As such, it gives you ample room to deal with unfavorable outcomes without having to panic. Be prepared emotionally to cope with unexpected emergencies affecting cryptocurrencies – such as high inflation or tighter monetary policies – as such emergencies can strain your finances considerably.
Here are some ways to prepare yourself before investing in cryptocurrency:
- Clearing any existing debt must be your top priority. After all, you can’t have that “breathing space” if you’re constantly bombarded with thoughts of loan interest and credit card penalties. Worst-case scenario? That mounting debt you ignore will exceed your investments and bury you into further debt. Don’t use your credit card to invest in the crypto market.
- Identify your short- and long-term financial goals to help you know what risks you can take and how long you intend to invest.
- The earlier you set these goals and your daily financial habits accordingly, the sooner you can consider investing.
These steps help you determine your margin – the amount you can afford to invest (or lose). Putting all these things first can give you more opportunities to invest safely, helping you achieve your financial goals.
Manage Investment Expectations
As mentioned above, investing in cryptocurrency can be a roller-coaster experience. High returns mean high risks. Suppose you understand this trade-off between profit and risk. In that case, you’ll learn to separate reasonable investment expectations and unrealistic and possibly illegal investment opportunities. To invest is to risk; you can’t have one without the other. Investment frauds often promise high-return opportunities with zero risks. Stay clear from these “opportunities” or, better yet, report them to the relevant institutions.
Report Scams and Frauds
If you want to make the cryptocurrency market a safer place to invest in for you and others, report fraud or any suspicious activity to the following government offices:
- The FTC (Federal Trade Commission)
- The SEC
- The CFTC (Commodity Futures Trading Commission)
- The Internet Crime Complaint Center (IC3) at ic3.gov/Home/FileComplaint
- The cryptocurrency exchange firm you used to invest your capital in
