Gate.io Blog 10 Important Points to Note Before Investing in Crypto Assets

10 Important Points to Note Before Investing in Crypto Assets

19 October 16:56

TL: DR

Due to the high-risk nature of Cryptocurrencies, it is very important that you protect your capital with adequate knowledge.
Before investing in crypto assets, some points to note include learning about crypto in general, doing specific research, and selecting a balanced portfolio.
Emotions, the fear of missing out, and unit bias are the common factors that may come between an investor and making a sound decision. Therefore, you have to rein them in.

Introduction

You may be itching to invest in crypto assets but know little about how they work. Indeed, there are exciting investment opportunities in the crypto-verse. However, new investors risk losing their capital if they are lured by grifters or back a new crypto asset without a track record. A veteran investor could also be swayed by emotion and overstretch his risk appetite to go against time-honored principles and guides. Hence, we will note ten crucial points before investing in crypto assets.

10 important points to note before investing in crypto assets

1. Have a general knowledge of crypto investing

As a first step to investing in crypto assets, you should know the general overview of the mechanisms for buying, exchanging, investing, and selling. You cannot invest in crypto assets blindly unless you have a plan for how you will approach them.

Look for platforms such as gate.io that allow you to deposit, withdraw and use different investment products. You can also study the fundamental steps in the crypto platform to understand what you stand to gain and also what you might be up against. The blog & learn section covers the basic, intermediate, and expert-level topics that can help you horn your crypto investment skills.

2. Do specific research on Asset

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When you have found some investment options that interest you, research will allow you to become aware of the risks associated with the crypto asset of your choice. When considering cryptocurrency investments, avoid the notion that "someone will buy it at a higher price in the future."

The importance of research is evident in the vast amount of information available about cryptocurrency, making it one of the mandatory additions to tips for investing in crypto assets. Look for community forums, online communities, crypto developer mailing lists, and professional crypto podcasts. Develop your knowledge of cryptocurrencies and related topics such as economics and cryptography. Clear your doubts about the crypto asset and investment option you are getting down to and apprise yourself of all you need to know about them before investing in them.

3. Select a balanced portfolio

Another pointer in the guide to investing in crypto assets would undoubtedly focus on developing a diverse and balanced portfolio. You cannot simply invest all of your money in a single crypto asset hoping its value will rise. Remember that cryptocurrencies are a high-risk asset compared to other investment options, owing to their volatility.

Crypto coin prices have been fluctuating dramatically in comparatively short periods. Hence, you can try diversifying your portfolio across multiple projects in various niches such as DeFi, gaming, NFTs, and others to mitigate the risk.

4. Beware of FOMO

You must learn to put your emotions in check when investing in a crypto asset and avoid moving with the herd due to the fear of missing out (FOMO). One of the most common mistakes made by first-time cryptocurrency buyers is the fear of missing out on a trend. Many cryptocurrency newcomers make the mistake of succumbing to this freak of emotion only to lose everything. Without the support of adequate research and Technical knowledge, your instincts can betray you, resulting in a loss on your investments. If you strongly feel about a particular crypto asset, the best action would be to consider the option carefully.

5. Pay attention to red flags.

If the story behind a crypto asset seems unbelievable, it probably is. Remember that the value of cryptocurrencies is determined not only by their actual utility but also by their perceived utility. Many charlatans in the crypto world will seize any opportunity to spin implausible stories about their projects. For example, you must have come across numerous projects that promise to outperform Bitcoin or 10X-50X of your capital. In most cases, these projects fail to deliver on their roadmap promises. As a result, if a cryptocurrency promises unrealistic benefits, you should investigate it thoroughly.

6. Trustless Approach

Although there are promises of cryptographic security, the crypto market has become a breeding ground for unscrupulous elements. Always conduct research and verification when considering investing in crypto assets as your first step to avoid scams. Use the necessary and available security measures to protect your digital asset from scammers and hackers.

7. Adopt a suitable investment strategy

There are two significant concerns for those interested in investing in crypto assets. The first is how to reduce volatility risk, and the second is how to get the perfect entry and exit timing. The timing is highly complex because it involves competing with an algorithm that counts milliseconds. Managing the two concerns of volatility and timing might not be easy, especially for those with little experience in financial trading. As a result, many trading strategies have been developed and implemented to address the concerns. One of these strategies, which often meets prospective investors' desire to mitigate the downside of volatility without worrying about timing, is the Dollar Cost Averaging (DCA)Trading Strategy among other long-term investment strategies.

8. Avoid unit bias

Unit bias is the belief that a cryptocurrency trading at $25,000 per unit is superior to a coin trading at $5. However, it would be best to discard such assumptions when considering investing in a crypto asset. You will likely encounter many functionalities with thousands of crypto assets available worldwide.

Because different cryptocurrencies have different functionalities, the tips for buying crypto assets would draw attention to removing ''Unit Bias.'' Some may have better decentralization, while others may provide better developer support. As a result, delving deeply into the technological mechanisms underlying a specific cryptocurrency can reveal a great deal about its potential.

9. Consider fractional ownership

Another important consideration that is a thing now for investing in crypto assets is the possibility of fractional ownership. For example, you don't need to buy an entire Bitcoin to establish your crypto ownership. Fractional ownership lets you invest in crypto assets, digital currencies, NFTs, metaverse products, and gaming items. Consequently, you don't have to put everything on the line for specific crypto investments.

10 Choose the exemplary wallet service.

It would help to consider selecting a suitable crypto wallet service for your crypto asset investment. Concerns about how to invest in crypto must also include selecting a wallet that can safely store the assets. On the other hand, crypto wallets operate by storing private keys to cryptocurrencies on a blockchain. You must ensure you keep your private key safe.

The bottom line is you should pay close attention to selecting a crypto wallet that can easily safeguard your assets.

Conclusion

The importance of a good guide on investing in crypto assets cannot be overemphasized. Many factors could prevent a person from making sound investment decisions. It is not uncommon due to the ups and downs of the crypto markets and other externalities. With thousands of projects being launched in the industry, it's easy to lose your head in the bubble of promises. To make a sound investment decision, among other things, take your time to dot the i's and cross the t's.

Author: Gate.io Observer: M. Olatunji

Disclaimer:

* This article represents only the views of the observers and does not constitute any investment suggestions.

*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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