If you have been following the news lately, you have probably noticed that the recent crypto bull run has attracted swaths of new investors and traders looking to jump into cryptocurrency. Between Bitcoin reaching an all time high price in late November and sensationalized coins such as Squid Game and Shibu Inu, it’s no wonder that there is a growing audience of potential crypto investors.
Rising crypto prices may be enticing to newcomers, but the reality is that the market can be finicky and unpredictable. If you are considering joining the volatile crypto trading market, there are some tips you should know before you begin.
Here are 5 things to know before you make your first investment in crypto.
1. Don’t Invest More Than You Can Afford To Lose
This one may seem obvious, but many beginning traders hold the assumption that positive fluctuations in the market will always outweigh the negative. And while there have been positive moments of a successful bull run, the market also experiences strong corrections. The most predictable thing about crypto trading is that it is unpredictable. The market can change in a flash without warning.
Further, there isn’t FDIC insurance to protect your investments against negative swings. It’s important not to put all of your eggs in one basket when it comes to crypto trading or any investment.
2. Trust Your Gut When It Comes to Sensationalized News
Investing in cryptocurrency is full of risks, but getting scammed shouldn’t be one of them. The downside of the buzz surrounding the market is that scammers often create false investment opportunities.
According to a report by the FTC, the number of scams reported since October 2020 has skyrocketed. Be wary of deals that seem “too good to be true” or impersonations of celebrities offering “giveaways” in exchange for a small portion of your portfolio. Always double check before investing.
3. Understand the Tax Consequences
Yes, your coins are taxable and it is important to understand how crypto is taxed — especially in the U.S. The IRS (International Revenue Service) classifies crypto investments as “property” rather than currency for tax purposes. This means that they will be taxed as assets the same as stocks.
Using crypto as an active method of exchange through trading is taxable, however, if you simply purchase digital currency and hold it within an exchange, it is not. The taxable value is based on the capital gains or losses you earn with your investments. Even a $1 difference in trading revenue is taxable.
4. Watch Experienced Traders using League of Traders app
Experience is crucial in properly understanding the market and how to time making moves. Social trading, the process of trading alongside others, drastically reduces the learning curve involved with trading. Newcomers have an opportunity to learn by observing more experienced traders.
League of Traders is a social trading service that enables beginners to make informed trading decisions by watching and following the techniques of others. The app works by allowing traders to visualize their assets across exchanges and use powerful copy trading features to directly mimic the trades of others at the top of their leaderboards.
League of Traders was created with beginners in mind to create an experience that caters to their needs and goals.
5. Don’t Obsess Over Prices
Go outside, grab breakfast with friends, participate in all of the other activities that bring you joy. Don’t become so obsessed with prices and capital gains that you forget to live your life.
The market will fluctuate constantly. Every day, every hour and every minute. However, the most important investment changes occur in the long term rather than the short. Crypto investments were not made to be watched and scrutinized at every moment — save that for Wall Street.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
