Cryptocurrency Investments: How to Lower Risks – search4answers.com

Cryptocurrency Investments: How to Lower Risks

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So you have an interest in investing in cryptocurrencies but are still concerned that something might go wrong? Set aside your concerns and read on.

You’re likely already aware of how enticing yet unstable the digital currency market is in nature. Constantly making headlines, cryptocurrencies have single handedly resulted in a windfall for so many savvy investors and also led to the bankruptcy of some. So, is putting money on cryptocurrencies a serious gamble or a smart play right now?

The cryptocurrency market’s immense growth drew in stakeholders from every part of the world who had expected similar gains as the first rush of lucky investors, but the virtual currency game has not been so generous to everyone. So our aim here is not to be your guide to hitting the jackpot with cryptocurrencies. In fact, we want to warn you against the drawbacks of this attractive investment venture.

We would like to get insanely rich, but we also want you to set feasible, attainable goals in terms of your investment not to get disappointed or incur a huge loss. Patience is a quality of much value in many walks of life, and this is also true where investing is concerned. Being patient is an essential part of reaching your goal in the investment world, especially when we are talking about cryptocurrencies. At a day and age where we are bombarded with fake news and misleading information about everything, coping with and overcoming the fear of missing out is incredibly important.

Always be mindful of the most basic but perhaps invaluable rule of investing: invest only as much as you can bear to lose.

Diversify to Lower Risks

Shockingly, some still adamantly believe that just buying Bitcoin is enough, and this is just wrong on many levels.

Although Bitcoin was the first to gain so much popularity and is indubitably the most prominent cryptocurrency right now with so much support behind it, considering its features realistically, Bitcoin still experiences delays, which does not sit well with some savvy enthusiasts. Though we are in no way saying Bitcoin is dead and you should just move on to the next best thing; keep in mind that there are other options available to you. In an attempt to reduce risks, also think about investing in cryptocurrencies that can easily measure up to Bitcoin like Litecoin, Ethereum, and Ripple.

The Idea Still Counts

Blockchain technology has progressed into a state where tokens can achieve more than just taking the place of fiat currency. Some cryptocurrency systems allow for unprecedented smart contracts like Ethereum and decentralized file storage such as Storj, and let’s not overlook decentralized exchange applications like Bitshares. So instead of opting to buy just one of each, it is an entirely smart idea to choose various currencies in a class to lower risks. In the cryptocurrency sphere, a parting among the members of the development team or merely a technical issue can lead to a price crash regardless of a platform’s future potential or their cutting-edge technology.

Sidestepping

Expert investors are all-knowing of how high-risk the cryptocurrency market really is. The cryptocurrency realm can go down in flames in the face of a serious security concern or strict government-level interference. Admittedly, while the chances of such events taking place are slim, they are not impossible.

Concerns About Liquidity

You can bet on a cryptocurrency, hope that it grows in value and still find that trying to sell it leads to a significant price drop, which is caused by low liquidity. In the face of a low exchange volume, you need to be ready for drastic fluctuations in price. Hence, to minimize this risk, you should ideally stay clear of cryptocurrencies with low exchange volumes.

Potential for Gains

Cryptocurrencies with low market caps interestingly have more potential to gain in comparison to those with relatively high market caps. The notion is based on the fact that a cryptocurrency can become popular, which can then up its market value. Think about your specific goals when you envision the cryptocurrency assets you wish to hold in your portfolio. Do lots of research; understand the specifics of each project that piques your interest.

Proof-of-Stake

Many investors have their eyes on raking in big bucks through cryptocurrency mining, but we have reached a point where the only projects that are likely to generate profits are the ones that are already millions of dollars. Mining has become a game in which only giant players with endless resources of funds play. Nonetheless, the most common alternative is Proof-of-Stake (PoS), which allows people to mine cryptocurrencies without having access to additional tools. Your cryptocurrency volume is the sole determinant of how well you are compensated in this algorithm.

Featured Image: twitter

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