Investing safely in cryptocurrencies is very important if you want to be financially free trading crypto. Due to the limited crypto regulations in the world at the moment, many dubious developers launch scam projects to rug pull and do away with investors funds. Some developers even tend to pump and dump the price of their coin thereby hurting investors and running away with a lot of money.
According to coindesk, crpto investors lost over $2.8B to rug pulls in 2021 alone. One of the most popular in recent times is the squid game coin which was launched by dubious developers following the hype created around the popular TV series, squid game. All these can actually be reduced if investors learn to invest safely.
WHAT TO NOTE BEFORE INVESTING IN CRYPTOCURRENCIES
Some noteworthy points to be taken into account before investing in any crypto project are:
1. Note the Risks
Investing in cryptocurrencies is very risky due to the volatility and lack of regulation in the crypto space. Any developer can simply launch a crypto token and have numerous investors rushing to buy if he/she advertises properly. It is of importance for any investor to know the risks associated with investing in crypto before getting in.
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Some of the risks involved include rug pulls, negligence of project team, price volatility in the sense that the price may rise or fall at anytime depending on the market sentiments. Having this and many more in mind will help investors mitigate their possible losses in the crypto space. In as much as investing in crypto is risky, it is still recommended for anyone who wants to be financially free because it is indeed the future of money and everything finance.
2. Start Small and Invest Only Spare Funds
If you’re just starting out in the crypto space, you’re advised to invest only what you can afford to lose because of the volatility and the possible risks involved. It is best to buy a small portion of a crypto asset and see how that goes before stacking up more. Buying at very cheap prices is cool but it is even better to make small profits rather than losing all your capital. Start small and grow big.
3. Do Your Own Research (DYOR)
Investors are always advised to do their research before investing in any crypto project. A personal due diligence is very important so as not to fall into the hands of scammers and dubious/greedy developers. Some of the key areas to watch out for while doing your research are;
- PARTNERS: Partnership is very important if a project must perform well in future. Most good projects have strong partners such as venture capitals, top tier exchanges and big influencers as partners. If a project has no verified partner, I would stay away from it.
- COMMUNITY: The strength of a project lies in its community as we have seen with projects like Doge and Shiba Inu. If a project has a very strong community and committed developers, it will definitely be a success. Strength of a project’s community contributes directly to the success of the project.
- TEAM EXPERIENCE: The experience of the core team directly affects the project. If a project is led by a highly experienced team, it is certain that it will perform well. This is evident in projects like polygon and polkadot. An experienced team will easily build up partnerships with other projects or influencers in the ecosystem since they have proven to be trustworthy with past experiences.
- TOKENOMICS/ROAD MAP: The structure of a projects tokenomics and its road map matters a lot when choosing a project to invest in. A project allocating a very high amount of tokens to airdrops or team members obviously doesn’t have the interest of investors at heart. Also, a projects road map shows what they have done in the past and what they plan to do in the future with regards to the development of the project. I would personally not invest in a project that hasn’t been meeting up with timeline or a project with a poorly structured road map.
4. Always Take Profit
Knowing when to take profit is as important as knowing when to invest. When investing in a project, set a goal on when you want to take your first profit and do so immediately that goal is met. Do not hesitate to take profit no matter how bullish the market looks at that time. The crypto market is very much unpredictable and could reverse in a very short frame of time. Always take profit so as to mitigate your losses. Do not be greedy.
5. Prioritize Long Term Investments
Investing for the long term is better than making quick money by joining pump and dump projects. Everything good takes some reasonable amount of time to mature. Bitcoin took a lot of time to get to where it is today and it is indeed worth it. Do not jump into pump and dump projects all in the name of making quick profits in the crypto space. Prioritizing projects with good use cases will pay off in the long run better than pump and dump projects.
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INVESTING SAFELY IN CRYPTOCURRENCIES: FINAL THOUGHTS
Investing safely in cryptocurrencies is very important especially with the increased amount of crypto related crimes. Due to lack of regulations, it has become pretty easy to run fishy crypto projects. Knowing how to avoid such projects and staying safe is quite important. Proper research should be done before investing in any project to avoid getting into the hands of scammers.