New to buying coins in the market? Ten things you must know!

How to start your crypto journey? Read these 10 tips.

New to buying coins in the market? Ten things you must know!

If you’re just starting to follow cryptocurrencies and wondering whether to invest, here are 10 things you need to know before you buy.

Even if you are a veteran cryptocurrency investor, if you meet a newcomer who is ready to enter the market, please share this article with him/her.

  1. Don’t put in more money than you can afford to lose

Cryptocurrencies are more risky than many other investments. Nothing is guaranteed except for volatility. What’s more, it’s unregulated in most cases. There is no FDIC insurance for this stuff, and no buyer of last resort. The price of cryptocurrencies fluctuates dramatically at all times. While the market is basking in the glow of a bull market, it has undergone a painful and protracted correction and will almost certainly do so again.

The degree of danger varies. Bitcoin, the original cryptocurrency, has been around for more than a decade, and it’s much less likely to disappear than most other tokens. But it’s not without risk.
Therefore, don’t bet your fortune or your life savings on any token.

  1. In-depth research

Before you invest a lot of money into any digital currency, spend hours researching the technology in order to understand its value proposition and risks. (“Someone will definitely pick it up” is not a value proposition.)
Read everything you can find on the subject. Lurk in community forums and developer mailing lists, listen to podcasts. Borrow books from the library, not only on digital currencies, but on related fields like cryptography, game theory, and economics. It’s okay to read relevant articles from CoinDesk or even from some of our competitor media outlets.

If the epidemic has improved in your area, go to a local offline gathering. Be bold and ask questions, and if you don’t understand what you’re hearing, don’t be afraid to ask someone. If you still don’t understand, don’t assume it’s your fault; people may just not be speaking plainly enough. Sincere people will take the time to help you, but even then, be wary of people asking you to buy a certain token.

Even if you’re convinced, find people with opposing viewpoints and listen to their point of view. Remember John Stuart Mill’s famous quote, “People who know only their own side of the argument know very little about it.”

Once you think you have studied everything you need to know, and continue to study in depth, things are not so simple.

3, resist the “fear of missing FOMO” emotion

If the only reason you invest is to avoid missing out, then you’re sure to end up losing everything.
Fear of missing out (FOMO) this emotion will certainly ruin your wealth accumulated over the years. The thing is, it’s an instinctive reaction, so we have to be prepared to do our research in advance. Most of the trades you make based on your instincts will come back to haunt you.

Know the underlying asset you are buying. Seeing a currency on a trading app that has appreciated by about 30% in the last 24 hours is not something worth looking into. Don’t go mindlessly chasing high to pick up such surging coins that you don’t understand.

Every cryptocurrency has some advocates, even Bitcoin. Don’t give in to peer pressure and choose blind faith, it’s not high school. Think independently and evaluate the merits of your investment.

Research and research and research again!

  1. If it’s good and not very realistic, it’s a sham

Like Wall Street, the U.S. Congress or the American Bar Association, cryptocurrencies are full of charlatans. There are enough of them promising that their projects will outperform Bitcoin. But is that really the case? There’s only one way to find out, and that’s to investigate.

Buy with caution! Beware of lending leverage too! Some cryptocurrency exchanges offer over 100x leverage, which means you can borrow up to 99% of the cost of your investment. If the token skyrockets, your profits will increase, but if it plummets, you’ll soon blow your position.

  1. Don’t be gullible, verify!

Scammers abound in this market. Just last weekend, some scoundrels on Twitter took advantage of Elon Musk’s appearance on the TV show Saturday Night Live to scam people out of $100,000 worth of various cryptocurrencies with fake “giveaways”. The miscreants mimicked the comedy show’s Twitter account and instructed victims to send a small amount of cryptocurrency to verify their address. If they did so, they would be rewarded 10 times over.

This incredibly good luck is a red flag to be vigilant!

  1. Be wary of “unit bias”

A token priced at $1 does not mean it is cheaper than $58,000 worth of bitcoin.

There are thousands of cryptocurrencies on the market, some imitating Bitcoin, some trying to solve other problems, all with varying degrees of developer community support and decentralization. The value of a token depends on the way it was created and what it means, what is its utility? Who is working on it? How big is the developer community? How active is the codebase? Are updates to open source software recorded and synchronized on Github? A project is like a building, the code base needs to be maintained or it will make it structurally unsound.

Most importantly, what is the token’s security model – PoW, PoS, or some other mechanism? If it is PoW, what is the network arithmetic? If you don’t know what these mean, then you are not ready!

  1. Without having a private key, there is no real ownership of tokens

Cryptocurrency is a bearer asset similar to cash or jewelry, which means that the holder is considered its rightful owner. Once it is lost or stolen, it disappears.

That’s why advanced users would advise you not to entrust the cryptographic keys to your digital currency wallet to a third party, such as an exchange, because these companies are largely unregulated in many places and can be hacked or abscond with the money. DeFi platforms have been heavily attacked in the past 10 months, as have centralized platforms such as Coinan.

However, keeping your private keys on a hardware wallet or paper wallet can also be a headache, which is why experienced investors prefer to use third-party escrow.
A lot of the problem in the cryptocurrency industry is one of trade-offs. Do you trust that you won’t lose your private key or helper word? If not, you’ll have to have it escrowed by someone else, and history gives you all kinds of reasons not to do so.

To mitigate risk, there is also a multi-signature wallet that can be configured to require n people to sign together in order to access the funds in the wallet, although this is relatively complicated for newcomers.

In addition to being under attack, exchanges may also fail to manifest at any time for such reasons, such as solvency issues or related legal disputes. Even some exchanges just don’t have a good enough infrastructure to keep their systems running properly, such as Coinbase and Robinhood which often fail during periods of violent market volatility, and if you don’t hold the tokens yourself, you are not guaranteed to have control over your tokens.
That said, there are many reasons why you might want to use an exchange, so it’s important to check the user agreement and make sure you’re protected against different possibilities.

  1. You can buy fractional amounts of bitcoin (same with other tokens)

It is possible to buy tokens in fractional amounts, such as Bitcoin, which can be broken down to eight decimal places. So if you’re interested in a particular token, try buying $10 and playing around with it.

Billionaire Mark Cuban recently said on TV about buying a small amount of dog coins, “It’s a lot better than buying lottery tickets.” Unfortunately, he also encouraged viewers to buy goods with dogcoins without mentioning the tax implications.

  1. Understand the tax consequences

This is especially important in the United States for several reasons. First, the Internal Revenue Service (IRS) considers cryptocurrencies to be property, not currency, and therefore taxable. The result is that if you buy a coin for $1 and it doubles in value, and you spend that extra $1 on a pack of gum, you will need to report that capital gain and pay taxes. Despite the cryptocurrency industry’s lobbying efforts, there is no “de minimis exemption”.

Additionally, centralized exchanges send account information to the IRS on a regular basis. Of course, cryptocurrencies are not regulated like stocks or banks. However, the federal government is running a huge deficit and it will not hesitate to send someone to visit you and ask about your cryptocurrency transactions.

  1. Use dollar units to calculate the average cost and don’t get hung up on the price

Get out and relax, get some fresh air, exercise and enjoy the sunshine, and spend more time with your family. Invest in cryptocurrencies on top of that.
The market is fluctuating all the time and we should have a long-term investment mindset. If you want a dopamine rush, go for a run or watch an action movie.

What is the best way to invest? That is to use dollar cost averaging (DCA). Buy a certain amount of whatever cryptocurrency you like every once in a while and then don’t look at it. If you have a long-term view, you won’t be forced to sell or increase your position due to short-term fluctuations if you use DCA.

The purpose of this article is not to scare anyone away from this fascinating and potentially transformative industry, but to ensure that they enter with a wary and cautious mindset.
It never hurts to invest with caution and care!

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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