Lessons learned from investing in Cryptocurrency
Introduction
There was a time when the word trading brought to our mind some aspects of the stock market. We have always associated trading with shares and the stock market until recently. Today, the world has a new asset for investment and trading. This asset is cryptocurrency.
The cryptocurrency was first introduced in 2008. It is an electronic currency that can be transferred peer-to-peer without the mediation of a regulatory body such as a bank. Transactions through cryptocurrencies are safe and secure through the implementation of cryptography. Crypto has, in a way, revolutionized the transactional network all over the world.
Today, many multinational corporations are investing in cryptocurrencies like Bitcoin ethereum to reap the benefit of faster and efficient transactions. The increase in demand has consequently increased the value of cryptocurrencies. It is for this reason, traders have shown interest in this ever-expanding crypto market. With the availability of trading platforms like https://thenewsspy.technology, investing in cryptos has become more accessible. In this article, we will discuss some important lessons I have learned from trading in cryptocurrencies.
Essential lessons on crypto trading
- Know your assets- there is a lot of hype around crypto trading. This hike is due to the bull run made by Bitcoin in the year 2017 when the value of a single Bitcoin rose to 20000 US dollars in a short period.
With this bull run, Bitcoin made billionaires out of casual investors. After this, trading activities increased manifold. The crypto market became the site of a gold rush.
But how well do the traders know what they are investing in?
The crypto market is very speculative, and the values of the cryptos are highly volatile. Before investing in specific crypto, one must conduct basic research on what the currency offers. Only through such an understanding will it be possible to speculate the growth of a particular cryptocurrency.
- Research objectively- any conscious trader will research before investing somewhere. However, the problem of subjectivity often defeats the purpose of their research.
Subjectivity often causes what is known as a confirmation bias. It is a tendency to look for information that will reinforce one’s current belief. For instance, if you are interested in investing in cryptocurrencies, you may ignore any information that claims trading may have some drawbacks too.
Being objective is the key to conducting good research. A balanced approach to arguments from all the sites will get you closer to the truth.
- Know your limits- trading can be highly lucrative because it can increase our assets by manifold.
Most of the traders who got into the crypto market after the news on the Bitcoin bull run (in 2017, then in 2021) have ended up losing a lot of money. The hype around Bitcoin had prepared them to invest their life savings in a very volatile asset.
After every bull run, the price of Bitcoin has fallen drastically. In 2021 the price of Bitcoin fell from 63000 USD to 20000 USD. Invest as much as you can afford to lose. The crypto market, just like the share market, is highly speculative.
- Timing and decision making- one of the biggest mistakes in trading is faulty timing. Sometimes the traders hurry in when making a decision, whereas other times, they make the decision too late.
With proper experience, a trader will be able to make the right decision at the right moment. Rushing in to buy an asset just when the price has started rising might be a faulty step. It is only through observation and patience that the trader can speculate the market trend.
Similarly, waiting too long to sell your assets can also be a wrong trading decision. Traders who hadn’t liquidated their holdings by the time the price of Bitcoin reached 63000 USD suffered huge losses when the price dropped almost by 60% of its value.
Conclusion: the crypto market is expanding rapidly. Today there are more than 5000 cryptocurrencies. New cryptos have improved on the existing infrastructure and offer better features. If you want to gain out of trading, make sure that you are updated on the recent development in the crypto market. This will allow you to make good predictions.