Cryptocurrency is slowly gaining acceptance around the world. Bitcoin and Ethereum are the industry leaders, but numerous other coins are available that offer great potential. Investors should know the basic do’s and don’ts when owning crypto so that they can make the most out of their investments.
Our List of Do’s and Don’ts of Owning Crypto
If you currently own crypto or plan to purchase some in the future, keep the following points in mind:
Don’t Panic Sell
Cryptocurrency is still in a state of volatility, and news announcements can quickly lead to people selling off their holdings. Bitcoin is a prime example of volatility, with the currency having over 100% volatility in a single 30-day period in 2020.
Investors that freaked out and sold off their holdings are now regretting their decision.
You need to have a strong stomach to invest in any cryptocurrency because you can make significant gains one day and suffer catastrophic losses the next day. Therefore, it’s best to invest money that you can afford to lose in crypto so that you’re not afraid that your entire retirement fund lost 20% – 50% in the last 30 days because the bulk of your investments are in crypto.
Do Diversify Your Holdings
Many investors go all-in on one type of currency, such as Bitcoin. These investors are confident that Bitcoin will remain strong and offer a superb return on investment, but you should have a diverse crypto holding.
Diversity helps you stave off volatility and significant losses.
At the time of writing, the leading cryptos in the world are:
- Binance Coin
You’ll find options with prices as low as $0.25, while Bitcoin is currently worth $47,000 a coin. Adding in some additional crypto options to your portfolio will help your investments in the long term.
Don’t Obsess Over Your Holdings
One major mistake that people make with their crypto, and any other investment, is that they become obsessed with the market. You should check on prices, but don’t be one of those people who are completely obsessed and decide to:
- Set price notifications on your phone
- Check prices multiple times per day
Investments rise and fall throughout the day, and it can be scary to see your investment fall 5%. When you’re checking your holdings often, you will make rash decisions because of fear and anxiety.
Markets will correct themselves over time, and there are so many variables that lead to crypto rising and falling.
Impulse buying and selling may work 1 in 10,000 times, but there’s a good chance that you’ll regret your decision. Take time to yourself and let your investments make you money. Of course, there needs to be a balance where you do check the market and make decisions on your holdings.
But this “time” doesn’t need to be multiple times throughout the day or week.
Do Spend Your Crypto When You Can
You’ve invested in cryptocurrency, but you always need to sell or use an investment if it’s going to be worthwhile. You will have to either go on an exchange to sell off some of your crypto for fiat currency or spend it.
Not sure where to spend your crypto?
A few of the places you can spend your currency are:
- Casinos. People are bitcoin gambling in the UK every day. While the trend of accepting crypto is still relatively new, you’ll find a variety of casinos now accepting Bitcoin, Ethereum and other great cryptocurrencies.
- Newegg. Purchase all of your computer components and parts with Bitcoin.
- Microsoft. Do you need software? Microsoft accepts Bitcoin.
In fact, you can use cryptocurrency at retailers across the world, with some of the most popular options being Starbucks, Overstock, Namecheap, Home Depot, ExpressVPN and tons of others. Some pizza places and even airlines are beginning to accept crypto.
Don’t Use Your Weekends to Trade
Weekend trading may seem like making the most out of your time, but it’s a bad decision for people who own any form of cryptocurrency. It’s true that the crypto market never sleeps, so people across the world are trading at all hours of the day or night.
But you don’t want to make the mistake of trading on the weekend.
Weekend trades are significantly lower volume, which means that you’ll experience a lot of volatility on the weekends. Predicting prices is difficult when the volume is low, so it’s not something that non-experienced traders should do.
Instead, spend time with friends and family or working on yourself rather than working on your crypto profile during the weekend.
You can go right back to trading on Monday, when the market will have the volume needed to lower the risk of extreme volatility.
Do Take Security Seriously
What do you know about security? Since crypto is held in online wallets by 90% of new investors, many people assume that their coins are 100% safe. Unfortunately, there are thefts that can cause thieves to become wealthy at your expense.
And since crypto is designed to be anonymous, it’s challenging and almost impossible to track down the thief.
You should try to take your tokens out of exchanges and place them in a crypto wallet. When you control the wallet, you’re at a lower risk of theft than a major exchange, which hackers will target most.
Multiple types of wallets exist:
- Online wallets, which are at a higher risk of hacking, but these wallets are accessible.
- Offline wallets, also known as cold wallets, which allow you to store your tokens offline. Security is highest with an offline wallet, but you lose some convenience. You also need to make backups just in case you lose your wallet.
Security is of the utmost importance, and while you may be a low-risk target for being hacked, there’s always a risk that you can be hacked or that the exchange where you store the currency will be hacked.
Crypto is growing in popularity and acceptance. If you have money tied up in cryptocurrency, it’s a good idea to follow the do’s and don’ts outlined above.