Have you ever heard of Bitcoin? Or crypto? Odds are, you have. Cryptocurrency seems to be a hot topic in today’s world, especially among college students and millennials. Cryptocurrencies are commonly known as digital currencies, or digital assets as some might say. There are currently over a thousand different cryptos that are available to the public, and each one has a specific use. Most people use these digital currencies either as a form of long-term investment, to day-trade, or to transfer funds to someone else. Here are five things that every student should know before getting involved in cryptocurrency.
- Do your research.
Whenever you are entering a new field, whether it’s for academic purposes or business, you should do your research before taking any initiative. The same applies to cryptocurrencies, especially since you are dealing with your own money and there are many scams out there. The first thing you should research is blockchain technology. You can check out articles, online forums, and vlogs discussing cryptocurrency and blockchain. From there, you should learn about the specific uses of each crypto. You may ask, who has time to read about over a thousand different currencies? That’s why a good starting point is to examine the oldest cryptos, as well as the ones with the highest market cap. An excellent place to take a look at them is CoinMarketCap. You can click on each coin to see their charts, markets, supplies, and websites to comprehend their intended uses better. According to Julian Wagner, a student at Antioch University and a crypto investor, one of the first steps you should take before getting involved in cryptocurrency is to, “Do your research! There are many coins out there, some are legit, some are scams. It’s important to understand that cryptos are considered assets and not actual currency, and so there is a much greater inherent risk when investing in them. Doing research is the most important step when getting into the crypto space, in order to understand this relatively new space. Understanding the risks and rewards will give newcomers a much better foundation to prevent unnecessary loss.”
- You do not need a lot of money to get started.
I’ve heard plenty of people say, “oh wow, one Bitcoin is worth $9,000. It’s too late for me; there’s no way I can spend that amount of money.” The truth is, you do not have to buy a whole Bitcoin. You can buy as little as $20 worth of Bitcoin and have a decimal value of one Bitcoin. Similarly, you can purchase one-fourth of an Ethereum, or one-fifth of a Litecoin, and so on. Now, where can you buy cryptos? You can buy them on cryptocurrency exchanges. There are a variety of cryptocurrency exchanges that are available to the public, such as Coinbase, Binance, Poloniex, Bittrex, and many more. All you need to do is register an account, connect your bank account, get verified, and you’re good to go.
- The crypto market is exceptionally volatile.
Here is where the universal investing phrase comes in, “do not invest more than you are willing to lose.” I repeat, do not spend more than you are ready to lose! The cryptocurrency market has been known to be extremely volatile. In merely one day, there can be huge gains or losses. You’ve probably heard stories of people that have gotten a second mortgage or have taken out loans to invest in crypto. I would highly recommend that you do not go down this path and you spend your money safely and wisely. This brings us to the next factor.
- Diversify your portfolio.
As with any other type of investment, the key to playing it safe is to have a diverse portfolio. Have you heard the common phrase, “don’t put all your eggs in one basket”? Underlining the importance of investment diversity is crucial. If you put all of your investment money into one currency, and that coin plummets, you’ll deeply regret it. On the other hand, by having “your eggs in different baskets,” you can minimize your risks in the case of a massive downfall.
- Monitor your profits and losses.
You’ve probably heard a lot of people say, “I wish I sold my Bitcoin when it was worth $19,000,” which is why keeping on eye on your investments is essential. Most people already know that the key to making money is to buy low and sell high. This concept can apply to almost anything in the business world, including products, stocks, and cryptocurrencies. It’s important to know when to cut your losses. If there has been a constant rise, chances are, there will be a dip, similar to any other market cycle.
It is evident that the popularity of cryptocurrency is bound to increase over the years to come. As Bill Gates stated, “the future of money is digital currency.” Now that you know how to approach this new digital market in a wisely manner, I suggest that you learn more about its potential and warn your friends and family of the regular mistakes that people make. If you ever decide to get involved in crypto, remember to do your research and take the necessary precautionary measures.