Things to consider before Crypto Investment.

Cryptocurrency is gaining traction; lately, people have been excited about the crypto industry as a whole. Though the recent crypto crisis has somewhat hampered the trust of general investors, it has still come up as a decent investment option. Crypto provides very high returns at similarly high risk; novice investors are attracted to the possibility and end up losing a fortune. To ensure the losses are minimum, one should know the basics and then it can be decided whether the cryptocurrency is a good investment.

Diversification

Prior to making anythe investment, it is advisable to diversify your portfolio across instruments to gain returns in the long run. While investing in crypto, one should decide the risk tolerance, financial goals and timeframe in order to decide the amount to be invested in an allocated portfolio.

Reading White Paper

Proper research is a must; simply a hot tip from a friend or just buying out of Fear-Of-Missing-Out (FOMO) could be harmful. Before investing in any asset, it is highly recommended to read its white paper in order to get an idea about its utility, use cases and possible future.

Knowing the Team

Understanding the team gives you a better idea, as their track record could ensure the authenticity of the project.

Technical details

After deciding to invest, one must choose from a number of available options for exchanges, wallets, currencies, tokens etc. Will the investment be done via an ETF or asset manager, like a mutual or hedge fund? Will this be a direct buying of a token or coin or an indirect investment such as buying stocks of companies involved in blockchain technology?

After sorting out these details, you know how to invest, but now another question arises, should you invest or should you not?

There is a huge difference between investing and trading. Your investment reasons and goals decide where to go. The major difference is the time frame; trading is for a lesser time, and investing is generally done for a longer period of time. The output for both can vary greatly, also the risk involved; trading gives a high reward at an equally higher risk, while investment minimizes the risk as well as reward.

Investing Vvs. Trading

Investing is generally done with a goal in mind, like a house, college fees, a car or things like that, something the investor wants to achieve 5 years down the line. Strategic planning is required to achieve desired results.

Trading, on the other hand, is for a lower time frame for short-term goals. Investors trade some amount on an hourly or daily basis, and the profits and losses are incurred accordingly.

It is advised to venture into the industry with an investingwith investing mindset in order to gain long-term profits. Also, this market is highly volatile, and liquidity constraints also play a major role. These constraints dictate the quicker availability and transactions. And this liquidity is at the end of the exchange.

Newer Assets

The industry offers a whole new range of assets to invest in. Each with its own quirks, so much so that major companies like Ark Invest have a dedicated Bitcoin investment.

Assortment

It is highly advised not to keep all the eggs in one basket. The same is advised here with the added benefit that crypto provides positive diversification effects, precisely against the rising inflation worldwide.

First move advantage

This sector is relatively new compared to traditional financial instruments and has the ability to offer a wider range of investment options. With time the industry will mature and could provide a plethora of options.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing