Investing in cryptocurrency has the opportunity to provide significant Return On Investment (ROI), but consumers should ensure they are doing their homework before investing. While most businesses involved in crypto can provide a significant profit, it’s important that consumers seeking to invest can identify genuine opportunities among many options. Important services such as bitcoin accounting by IBA, help you understand basic through detailed information about bitcoin, or specific financial accounting issues.
In light of that, here are the top five things you need to know before investing in cryptocurrencies:
1. Be vigilant
Many of the concerns surrounding security and hacks, while well-founded, are usually avoidable, even for those that are not technology savvy. Vigilance may come in the form of choosing the best blockchain company to manage your investment.
If investing on your own, keep in mind:
- Use reliable wallets and exchanges. Just like you would not deposit your life savings into a pop-up financial institution with a cardboard sign outside, you need to do your due diligence when it comes to the organizations accountable for holding your money.
- Private keys should not be shared
- Keep money in wallets you control, for instance cold storage.
2. Research your options
Everywhere you turn in cryptocurrency; there’s another sure thing or hot take. If you are investing into cryptocurrencies on your own, make sure that you come up with a personal research checklist by asking yourself:
- Is there proof of beta or concept? Making sure the company provides you with proof of beta or concept means your ROI will be great as the company matures.
- Can the company’s code base be opened? Where possible, you should be able to review the code base of the company to validate its entire source code collection.
- Is this company dealing with a real issue? Find out if the company has identified an area of opportunity or it’s an imitator of an existing offering?
- Do they have a genuine team? You can review their presence on LinkedIn to validate their team as reliable and skilled players in the cryptocurrency crypto space.
3. Be realistic
Cryptocurrency purchases are often oversold as 1000% gains. While that has been the scenario before, and might take place again, your investment strategy can’t rely on this. You should be realistic about your investment. Think about the .com boom where a few of the highest market cap/valued businesses surfaced but many, if not most, threw in the towel. When investing in cryptocurrencies, remember:
- To be certain about the resilience, reliability, and quality of the investment, you should stick to blue-chip stocks, such as LTC, Ether, Bitcoin.
- You should take some gains off the table when you can. It is all paper money until you cash it out , that is, until cryptocurrency replaces dollars.
- Nowadays, the new penny stocks are ICOs. If you are going to venture into an investment that’s high-risk, ICOs might be of interest.
- It is important to diversify (yes, even with cryptocurrencies).
4. Be accountable
Crypto can belong in any investment portfolio, however, it needs to be treated as high risk. You can put 10 to 20 percent of your portfolio into cryptocurrency investments; however, you can minimize extreme risks by making sure your portfolio remains diversified.
5. Monitor your gains and losses
As cryptocurrency is international and does not yet identify as a ‘real investment,’ most people say capital gains do not apply. Regardless, you have to monitor your gains and losses for your own know-how to observe how your portfolio is performing.