How to Invest in Cryptocurrencies – 10 Must-Follow Tips

Handy Tips / 31.08.2020

The Cryptocurrency world is filled with scams, frauds, pump and dump schemes, and dozens of other ways by which people can steal your money. Along with that, the excruciating volatility of the market doesn’t help either. It is easy for any new coming investor to be scared off by an already infested market with so many money-losing schemes. But then, don’t we always say “with greater risk comes greater reward”?

In a still-nascent market and budding market, there are as many ways of making money as there are losing it, if not more. It’s just a matter of who gets here first.

To ensure that you are not scared off by the overwhelming wave of uncertainty, you have to be sure to avoid mistakes. Be sure to equip yourself with a strong base that’ll act as a safety net, protecting you from any harm.

And so, to tell you what the safety net should comprise off, here’s a list of Top 10 things you should keep in mind before investing in cryptocurrencies.


Now, the most important thing that an investor should keep in mind is to DYOR. DYOR stands for Do Your Own Research, and it means exactly what it says. No matter what sector you are trying to put your money in, be it stocks, real estate, or crypto, there is no alternative to hands-on research. With cryptocurrencies, like any other asset class, there are dozens of variables that can help predict the future. The variables can range from the project’s idea, development team, nature of the market, type of token, and so on.

2. Know Your Risk Preference

To ensure that the market’s daily activities do not affect your mood, every investor needs to know and analyze their risk preference. For instance, if an investor’s risk preference is low and it would not suit him to get into a market that is prone to high volatility and unstable returns, he should not get into the crypto market. The cryptocurrency market is known to be volatile and will continue to be so short. After getting comfortable with the risk, the investor can find projects that match his preference and goals.

3. Use Trusted Exchanges

Settling upon a trusted and secure exchange can be the difference between being safe or getting hacked. An exchange is a place where you can buy or sell cryptocurrencies. Historically, centralized exchanges are prone to attacks, and dozens of them have been forced to close their operations due to severe losses. Investors are advised to research and choose exchanges that best suit their needs and, at the same time, are proven to be safe.

4. Diversify the Portfolio

It is true when someone said not to put all your eggs in one basket. The concept of Portfolio Diversification has been a centuries-old strategy, yet it is relevant now more than ever. Portfolio diversification means to expose oneself to a variety of assets, instead of a few, so that when one goes down, its effect is compensated by the others. A diverse crypto portfolio should contain tokens that range in their functionality, i.e., utility tokens, security tokens, and remittance mechanism.

5. Consult Various Sources

A reasonable strategy while researching a project is to make sure you consult various sources. Hearing different opinions can be healthy, as it will prevent you from being biased or getting emotionally attached to any particular project. One should make sure they are certain about what they want to invest in. There are several resources available online that can help one to circle down on the right project. Some of them are:

  • Project Telegram Groups – BitcoinTalk Forums
  • Crypto News Platforms
  • Market Influencers
  • Developer LinkedIn Profiles

6. Not Your Keys, Not Your Crypto

A term made famous by crypto-evangelist Andreas Antonopoulos, ‘Not your keys, not your crypto,’ emphasizes that you should be responsible for your funds. Most exchanges, wallets, and other service providers function as custodians. Meaning that they hold the funds for you. And so, if anything happens to the service provider, you risk losing all of your savings. Be sure not to store large amounts with any centralized party, and use an offline wallet whose private keys you control.

7. Only Invest Money You Can Afford to Lose

Remember, once again, this market is still in its infancy. Infant markets are known to be volatile and unstable, as it is still figuring its place. Thousands of investors have lost their entire savings because they couldn’t handle the market’s uncertainty. Thus, be sure to invest money you can afford to lose.

8. Read the Whitepaper

Almost all crypto projects out there have a “whitepaper.” A Whitepaper is a technical document issued by the developing team. It talks about the goals of the project and how they mean to achieve it. Make it a point to go through the whitepaper of every project you are interested in. It will help you understand the technical side, as well as figuring out what is BS.

9. Use Multi-Factor Authentication

Another important advice is to use multiple security layers for your wallets, exchanges, and email IDs. Making it hard to hack your assets will help you stay safe and ahead in the game. Techniques such as 2FA, OTP, email verification, etc. can be used to make your funds secure.

10. Do Not Be Afraid to Cash Out Profits

Although sometimes it might feel like the wrong thing to do, one should always remember to cash out profits whenever possible. Remember that you are here to make money, and being emotionally attached to a particular project will not help you achieve that goal. Cashing out can help keep your feet on the ground, and in the long run, make you better off.

Sudarshan M is a long time crypto-enthusiast. Pulled in by bitcoin early on, it did not take long for Sudarshan to divert all of his academic attention from business studies to blockchain by doing his Masters and eventually pursuing his PhD in the subject.