Top tips for investing in cryptocurrency
Cryptocurrency is no get-rich-quick scheme
Before you begin, you must know that despite some early Bitcoin investors reaping rewards in the millions of dollars, cryptocurrency is not a quick way to get rich and comes with serious risks. It is speculative and no matter the type -- whether Bitcoin (BTC), Ethereum (ETH), or company tokens, cryptocurrency is seen as a volatile asset.
Initial Coin Offerings (ICOs)
Initial Coin Offerings (ICOs) is one of the latest trends in the cryptocurrency space, in which investors trade cryptocurrency for business-specific tokens to fund projects. While some, such as Kodak's ICO, are reputable, many are losing thousands through exit schemes. If you choose to participate in an ICO from an unknown company, do not consider your funds as protected.
The fear of missing out
The fear of missing out, especially in last year's cryptocurrency gold rush, can spur on would-be traders to invest their cash without researching the coin, market, and companies involved first. This can be a fatal mistake and as demand surges, prices rise -- and there is always the possibility of a crash after investment interest wanes.
Whenever possible, use cold storage methods to protect your cryptocurrency. Bootable, encrypted USB flash drives containing wallet funds are the most common method and will keep cryptocurrency safe in the event of an online exchange's wallet being compromised, as was the case with several exchanges last year .
Be aware of country laws
Governments and regulators worldwide are now exploring ways to control the cryptocurrency market.
While some countries, such as China, have chosen to outlaw payments made in cryptocurrency altogether and rumors of a similar crackdown in South Korea had enough power to rock Bitcoin prices, others, such as Sweden and Denmark, welcome trading.
Changes in the regulatory space are enough to close exchanges and send prices crashing, so stay vigilant to any laws which prevent trading or may harm your investment.
Set goals and stick to them
You may have dreams of a cryptocurrency investment making you millions in the future, but by learning to read market trends, you can stick to manageable goals. Five to 10 percent on an investment is good going, so if you've reached your target, consider cashing out.
Be aware of scam artists
As interest in cryptocurrency grows, so does the interest of fraudsters and cyberattackers. Phishing campaigns, spam emails, and fraudulent ICOs are all part of the problem and so you need to remain wary.
So-called "sh*tecoins" are appearing rapidly in the attempt to rake in cash without the coin having any real future or technological value, and scammers are now constantly targeting ICOs with pre-ICO email campaigns, designating users to send cryptocurrency to hacker wallets.
It's a minefield, and one potential investors must navigate carefully.
Only invest what you can afford
As with any investment, you should only put in what you can comfortably afford. Some cryptocurrency investors that have lost out when exchanges are hacked or startups perform "exit schemes" -- running off with cryptocurrency belonging to users -- have reported losing their entire life savings. Don't be one of them.