How amazing would it be to pay money for something that later explodes in value? People that owned stock in Microsoft, Apple, Google, and many others know this euphoria. For many investors, this is the dream they all have.
In the past, these opportunities were few, but there are more now. Thanks to Bitcoin, cryptocurrency is a hot topic in the financial world. The volatility of cryptocurrencies means their prices can skyrocket or crash without warning.
The number of cryptocurrencies number in the thousands. How should you go about selecting cryptocurrencies for trading? Here are five things to consider.
1. Select a Good Crypto Exchange
A good crypto trading platform has a wide array of cryptocurrencies you can purchase. It also has options for making deposits, withdrawals, and conducting trades.
The most important feature is good security. Cryptocurrencies are unregulated, which means scammers are everywhere. They look for unsuspecting investors to scam them out of their cryptocurrencies.
Before committing to a platform, find people who have experience with that exchange and find out their experiences.
There are also other options, like crypto ATMs, such as ByteFederal.
2. Assessing Risk When Choosing Cryptocurrencies for Trading
Bitcoin is the most volatile, oldest, and stable cryptocurrency on the market. These qualities make it a safe investment.
All other cryptocurrencies are called altcoins. Ethereum, Litecoin, and XRP are stable altcoins, which makes them safer investments as well.
All other cryptocurrencies are high-risk investments. There is a lot of potential to make a profit, but also to lose money. Before choosing a cryptocurrency, you need to assess how much risk you’re willing to handle.
3. Take Time to Understand the Applications of Your Crypto
Aside from value, how do cryptocurrencies differ from each other? To discover that, it’s a good idea to do some research and look into its background.
One of the most important things to consider is its real-world application. Some businesses allow customers to pay for things with cryptocurrency.
Cryptocurrency also needs the trust and support of a community to ensure its longevity. Dogecoin started as a joke currency, but now some businesses accept it as payment thanks to its thriving community.
Other factors to consider are liquidity and regulations regarding cryptocurrencies in different countries.
4. Invest in a Crypto Wallet
As the name suggests, crypto wallets are virtual or physical wallets that store your cryptocurrency. Cloud-based storage is the preferred method today, but for your cryptocurrency, a cold wallet is best.
Virtual wallets are known as hot wallets because they connect to the internet. An internet connection leaves them vulnerable to cyber attacks and theft. Cold wallets are physical devices that keep a trader’s private keys safe.
If you do use a virtual wallet, use a VPN to encrypt your data. You should also use two-factor authentication.
5. Watch for Possible ICO Offerings
Initial Coin Offerings are the IPOs (Initial Public Offerings) of the cryptocurrency world. ICOs can be an engine for huge gains if you play your cards right.
ICOs are options for investors who have a broad understanding of the crypto market. There aren’t any reports or graphs to read, so a working knowledge on the offering and the company determines if this is a good investment.
Investors can look into past successful offerings and current trends to help inform their decision.
A Place for Financial Literacy
Cryptocurrencies are a viable investment strategy if you put in the work to learn about them. The most important things you need when selecting cryptocurrencies for trading are information and security. Gather all the information you can to help you decide which cryptocurrencies are best for your investment strategy.
If you enjoyed this article about options for cryptocurrencies, we have more like it for you to read. We provide information on investment news and financial literacy. If you want your money to work for you, start by checking out our resources.