Cryptocurrency investment seems to be the hottest thing the markets now. But should you invest in crypto? In this guest post, Global Prime co-founder, Jeremy Kinstlinger, discusses the five things he believes you should look at before jumping into the market.
With prices going up, cryptocurrency seems like an exciting investment opportunity. New research by Finder reveals Australians are more interested in investing in cryptocurrencies than ever, with over a third (35%) believing Bitcoin will eventually be transacted more widely than regular currency.
Other findings from Finder’s research included:
- 1 in 6 Australians owns cryptocurrency
- Almost one third of Gen Z (31%) own cryptocurrency
- Men are twice as likely (23%) to invest in cryptocurrency as women (11%)
- 15% of Australians have a cryptocurrency trading app
- One in five non-cryptocurrency owners would like to buy cryptocurrency, but don’t know how.
When you're just getting started in crypto, the buying process can seem confusing, and there are several pitfalls that the inexperienced crypto trader may stumble upon.
In particular, it’s important not to let your emotions get the better of you when it comes to making trading decisions. The fear of missing out is real. Usually when you start hearing about a cryptocurrency asset from friends or online it’s because it has already gained a significant amount, and you should be careful of jumping in before doing your research. The biggest gains to be made are from ‘hidden gem’ cryptocurrency assets which your research has shown is a good trade to take. Keep in mind that these can also be riskier as they may be new.
If you feel like you may be ready to take the plunge with cryptocurrency, here are my top five insights for first-time traders and investors:
1. Do your research: Cryptocurrencies are a very nuanced ecosystem that is constantly evolving. You need to have your eye on the recent developments. A great start is to follow 20-30 active Twitter accounts that cover cryptocurrency and check in on your feed daily. There are also active Discord communities which you can join for projects that you are interested in. Global Prime offers a Discord community chat which has a dedicated crypto channel.
2. Have a trading plan: When trading cryptocurrency or any other asset it’s important to go in with a plan. Know how much you are potentially willing to lose on the trade and set a stop loss which will close the trading position if it drops to that level. You can use position sizing to determine what your risk per trade should be.
3. Be prepared for a steep learning curve: It can almost become a full-time job keeping up with the developments in cryptocurrency. Be prepared for a steep learning curve, but also a highly rewarding experience if you’re willing to put in the work to understand how trading works and the risks involved.
4. Know the risks involved: If you haven’t learned about the risks involved with trading including risk management, position sizing, and learning to control impulses, then you’ll most likely lose money in the long run. Also, be on the lookout for scammers and hackers - there are many cryptocurrency scammers operating, and ways that you can be hacked or have your money stolen if you aren’t careful.
5. We’re still in the early days: Cryptocurrencies are still a relatively new asset, and you should expect volatility. In a lot of cases the entire cryptocurrency market will move in tandem and if the prices are going down then all your cryptocurrency assets prices can go down together.
As cryptocurrencies are still a new asset, it is often regarded with scepticism, and there are many myths surrounding it. However, it’s definitely more than just a fad. In the dot com boom many projects had insane valuations and most disappeared over time.
Either way, the internet as an underlying concept turned into what it is today, and standout companies have stood the test of time. Cryptocurrency as a concept is like what the internet was 25 years ago, and a lot of the work being put in will only be fully realised in the future. We are still early in its development.