Investing in cryptocurrency is a profitable way to invest. But it is impossible to say that it gives a 100% return. As in any other area of investment, there is a risk of losing money when buying tokens.
Risks of investing in tokens
Investing in tokens can not be called passive income. That is, the investor must conduct a complex and painstaking work to analyze assets and select a project for investment. Only in this case it is possible to buy those tokens that will grow in value and bring profit to the owner. Let’s consider the risks of investing in tokens and ways to level them.
Possible risks of investing in tokens
Risk is an integral part of any investment. Most often the rule of direct proportion applies. The greater the risk of investing, the greater the potential profit. And vice versa, if the risks are minimal, record profits should not be expected either.
An investor can regulate the degree of risk by his own actions. But let’s consider the main mistakes of beginners, which increase the risks. And we will also immediately consider what actions can reduce the risk of losing money.
Lack of analysis of the project before investing. You can not invest money, focusing only on the advice of “experts” or other parameters. You should always analyze the tokens yourself. Moreover, you need to analyze the general situation in the cryptocurrency market. After all, the token rate correlates with the value of crypto. Therefore, with the general decline, investing in new projects should be very cautious.
Emotionalism and stress when investing. One of the “enemies” of a token investor is emotions when making buying and selling decisions. When investing, beginners often get rid of the asset too early, when the rate still retains the potential for growth. Or they “over-hold” the coins. That is, after the initial price growth, there is usually a correction and they do not have time to fix the profit at the peak.
Ignoring the prerequisites for the trend reversal. This risk is related to the previous one. Often investors, observing the initial growth of tokens, “forget” about them and keep them on the wallet, hoping for a further increase in price. However, it is necessary to monitor charts and apply technical analysis tools all the time. Then you can notice an emerging trend and avoid losing money when the rate reverses.
One of the main dangers for a novice investor is a negligent attitude towards investments. Cryptocurrency does provide an opportunity to earn. But doing so is not as easy as it seems at first glance. Study the information from the Blockchain Encyclopedia on the site to reduce possible risks and increase the effectiveness of investments.