Cryptocurrency has become a hugely popular investment option in the last few years. There are plenty of people out there making good money from crypto and new coins are being released all of the time. This means more opportunities for new investors. However, it’s a mistake to think that crypto is easy money for everybody. Like any other investment, you need to do your due diligence and make sure that you are strategizing properly if you want to manage risk and reduce losses.
With cryptocurrency, there are additional challenges you need to overcome. This is relatively new technology and that means people are often trying to take advantage of novice investors. There are a lot of common mistakes people make too. So, to help you avoid any disasters, here are three things to look out for when investing in crypto.
Pump and Dump Schemes
Pump and dump schemes have existed for a long time. They were originally conducted with stocks and shares but the same concepts work with cryptocurrency. A pump and dump scheme is when people will artificially inflate the price of a cryptocurrency that they already own, and make huge profits by selling it all when the price goes up. After they sell, the price plummets again.
Often, people use social media to encourage lots of people to buy into a certain cryptocurrency so the price shoots up and they can sell, leaving everybody else with big losses. The way to avoid this is through proper research. Don’t take information you find online at face value, always do thorough research into a coin before buying it.
Meme coins are similar to pump and dump schemes. There are certain coins that gain ‘meme’ status online and lots of people buy into them in a short space of time, sending the price skyrocketing. In some cases, you can actually make money from these coins as the price sustains itself. If you look at the Dogecoin current prices, for example, you’ll see that it remains relatively stable, even if it has dropped since it first gained popularity. However, a lot of meme coins disappear as soon as the next big thing comes along. So, be careful about putting all of your money into a meme coin because they’re incredibly volatile.
Your cryptocurrency is kept in a digital wallet. This protects it and allows you to spend it or buy and sell easily. However, there are a lot of scammers out there hosting fake wallets online. As soon as you put your crypto in, it disappears and it’s unlikely that you will be able to get it back. Criminals work across international borders, and it is very hard to trace them and recover the funds, so you can easily lose everything. This list of reliable crypto wallets will help you find one that you can trust.
The most important thing when investing in cryptocurrency is that you do your research before jumping into anything. As long as you do that, you can avoid any disasters.