Even though cryptocurrency projects are run by code, most projects have a handful of people still making the major decisions (unless it’s a Decentralized Autonomous Organization). Let’s dive in 7 things you should know before investing in crypto:
1 – You Can Lose All Your Capital
This one really applies to ANY type of investment. Only invest money you can afford to lose! Even if a cryptocurrency or project seems the best thing you’ve seen in the world, consider investing only a small amount.
Diversify your portfolio with other investments such as stocks, real state, p2p, etc.
2 – Crypto is Extremely Volatile
If you come from the stock market and think it is volatile, then you definitely should prepare yourself mentally before investing in cryptocurrency.
Because there is less money involved than the stock market (I wouldn’t be surprised if it changed in the future though), then it’s easier to feel when big investors sell their crypto, thus leading to even more retail investors selling. The same applies to a bull market, the pump and dumps seem to be more noticeable.
Make sure to know the ins and outs of crypto and to be prepared to see your assets drop even to 90% less of what you’ve initially invested.
3 – Make Sure To Invest In An Audited Project
Would you give your savings to a random stranger in the street which promises you to be rich in exchange of your money? No, right? Yet many people easily give their money to risky projects perhaps because their website is beautiful and they seem trustworthy (different from actually being).
So, before investing in a project, make sure to double-check if they’re audited (even check the auditor’s website just to be sure). There are other things you should check like:
- Does the project have multi-sig? If so, it means that one dev can’t rug pull the project, leaving all investors with zero of their initial investment.
- Check if the team is anonymous, and have been KYC by an external entity, e.g., RugDoc? If so, we get another assurance that the team is legit even if we don’t know them.
4 – Controlling Your Emotions Is Key
If you can’t hold your bitcoins for 10 years, then you shouldn’t hold it for 10 days. Yup, you’ve heard it right.
No one gets rich from one day to the next, even though there are many gurus telling you so. I’ll tell you something… they sell you a dream so they can get your money! Nothing is this life can be accomplished without sweat and work.
So, read books, educate yourself because the more you invest in yourself, the wealthier you will be, in every aspects of life.
5 – There Isn’t an Intrinsic Value In Most Projects
Unlike new protocols that have been appearing recently like Olympus Dao, most cryptos don’t have an intrinsic value. This means that the price of the coin is what people are willing to pay for it. In stocks you can calculate the value of one share by looking at the company’s results.
Don’t forget to take that into account before investing in cryptocurrency, that most coins are driven by emotions, not an intrinsic value.
6 – There Are a Lot of ‘ShitCoins’ Trying To Scam You
You may have heard of Dogecoin or Shiba Inu and that some people got millionaires out from them. But you have to understand something… either they have risked a good part of their savings (I don’t recommend not diversifying your portfolio), or they were already wealthy enough to throw some dollars at it.
Remember that it’s enough that most coins don’t have an intrinsic value. Don’t add another bad thing to it, like not having any real utility.
This doesn’t mean that some meme coins won’t prevail, but in my opinion, it’s really not the best strategy.
7 – Future Performance Is Independent From Past Performance
Even though Bitcoin is deflationary and has thousands of percental increase since it’s inception, this doesn’t mean that it won’t even disappear or even crash… forever.
Be smarter than 99% of the people investing and don’t let FOMO (fear of missing out) or FUD (fear, uncertainty, doubt) control your emotions. Make your own decisions according to your researches and gut feelings.
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