7 Things to Know Before Investing in Cryptocurrencies

As the global economy continues to get worse, recent events around the world, like the freezing of bank accounts in Canada and the economic sanctions put in place because of the ongoing crisis in Ukraine, have brought more attention to the cryptocurrency market.

From the desire to keep riches despite the collapse of fiat currencies to the need for a dependable means to transmit value across town or across borders, an ever-increasing proportion of the world's population is now finding itself scurrying to learn more about and obtain access to crypto that provides protection from the many raging storms. Cryptocurrency, also called "digital currency," is a digital asset not controlled by a central bank or other governing body.

Before you make any investments in the cryptocurrency market, there are seven things you need to be aware of:

1. Before investing, learn about the buying, selling, and exchanging of cryptocurrencies

To move money into and out of the cryptocurrency ecosystem, you should search for systems that let users deposit and withdraw their native currency. It is important to have a fundamental understanding of purchasing and selling items to make the process more manageable when the time comes.

Since cryptocurrencies aren't widely used in everyday transactions yet, it's important to be able to turn your cryptocurrency holdings into fiat currency so you can get the most out of your gains.

2. A diversified portfolio is key to long-term success

The cryptocurrency market is characterized by a strong desire for tribalism and an all-in commitment to a single token as a result of several variables, the most prominent of which are ardent believers and smooth-talking con artists. The great majority of projects either give more moderate returns or fizzle out entirely at the first true taste of bad market circumstances, but there have been instances of half-cent tokens flying to hundreds of dollars. These stories do sometimes occur.

In a volatile cryptocurrency market, the most prudent strategy is to diversify one's holdings by investing in leading projects in established industries like gaming, decentralized finance, and layer-one protocols. Once these fundamentals have been addressed, placing smaller wagers on potential moonshots is not out of the question. Nevertheless, keeping a close eye on position size is essential for minimizing financial loss.

3. Do your own research before taking any action

Before putting money into a project, you should spend a lot of time researching it to find out if it will work in the long run and if it is something you want to keep.

Never make a purchase of anything just because someone you know (or don't really know) encouraged you to, particularly if they are promising you a risk-free experience or assured returns on your investment. You should get away as quickly as possible if you hear anything like that. Cryptocurrency is fraught with inherent danger, and it's estimated that within the next ten years, 95 percent of the tokens that are now in circulation will be worthless.

4. Compare the roadmap with developer activity

One of the many benefits of using open-source software is that it lets regular users see what developers have done recently. This gives them a better idea of how far along a project is right now.

Any project that is worth devoting more time to investigating will also provide a link to its repository on GitHub. This provides users with the ability to get an up-to-date view of the most recent work that has been completed on a project. If the last post on GitHub was months ago, but the roadmap suggests they have big releases coming in the near future, this is generally a warning indication that the project could be attempting to scam its way to success before yanking the rug out from under naive bag holders.

5. Timing is everything

Even when people have the best of intentions, the majority of investing in the cryptocurrency community is motivated by emotions. This may lead to ill-timed purchases, which can result in value being lost. When a token first starts to move on the market, many things tend to work together to make the rally go up, attracting naive investors who can't control their FOMO (fear of missing out).

If you really need a token, you should ignore the fear of missing out (FOMO) emotion and wait for the price to blow off and settle down. In such a case, you should look for another reliable project that has been trading at a steady price yet has genuine potential, ride that project's wave higher, and then cash out your winnings when the time is appropriate.

If this is a project that you just want to hang onto for the long term, do not allow any fear, uncertainty, or doubt (FUD) to shake your determination.

6. Don't invest more than you can lose

As was just discussed, cryptocurrencies come with an inherent risk, and the majority of tokens will ultimately be worthless. Keeping this in mind, you should never put in more money than you can afford to lose in an investment.

The funds that are invested in the cryptocurrency market should come from what is left over after all of a person's other living costs have been paid for and a little bit of a buffer has been placed aside in case of unexpected events. When a bear market begins, there is no assurance that the value you invested in a token will be there in the long run, and even if it is, it may sometimes take years to restore what was lost.

7. Keep the long term in mind

Many people enter the world of cryptocurrencies with the expectation of making quick money. Sadly, most of them fizzle out just as fast as they emerge because the road is littered with cons and traps meant to bilk destitute people out of what little income they have.

Bitcoin's price of $50,000 was reached after a period of ten years, during which the path there was anything but easy or certain. The same thing will be true for any token that manages to survive over the long run, with only the most well-informed and faithful holders being able to enjoy the largest rewards.

Find projects with a real-world use case, a supportive community, and a devoted development team to accumulate steadily over time. While doing this, keep in mind the previously discussed guidelines and the overall bull and bear market cycles. The Pumpkittens GameFi project on Fantom is an excellent illustration of this. The idea only had a tiny crew, and it didn't have any investors or venture capital support. However, the community began to participate in it after seeing the potential of the innovative ideas they offered. As a direct consequence of this, it has become one of the most successful projects hosted on Fantom. So, just because your team is small doesn't mean it will always do badly. Instead, you should focus on finding players with long-term potential.

Both cryptocurrencies and the widespread use of blockchain technology are still in the infant stages of their development, with decades of expansion yet ahead of them. So, remember to calm down, turn down your fear of missing out (FOMO), and invest in the cryptocurrency market more methodically to give yourself the best chance of success in the long run.

That's all for today, see ya tomorrow! If you want more, be sure to follow our Twitter (@croxroadnews)

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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