What risks should be considered when investing in cryptocurrency?

Some still avoid using cryptos because of irrational fear this type of investment is not regulated and will be risky. So what is important to consider about risks in cryptos?

Remember that most often, this area is not regulated. You are not protected from scams or a “bad entry point”. Novice investors often have a situation where they, selecting a quality product, can go on high.

The project is promising when it has a breakthrough idea, a good product, a strong team, support, and a reputation. But if you enter the project at a too high price, you will have to bear losses, especially in the short term. Besides, many projects are launching on the market this year, so it will be a die-hard process to choose among them. It is better to use cryptocurrency exchanges instead of new crypto investing at the very start. Start with something that proved its reliability and efficiency not to lose.

If you are still eager to invest in new coins instead of buying popular ones, it is better to choose a good project in terms of fundamental parameters than trade on hype coins and go into the red.

Remember: A long-term investor earns more than a short-term trader. But only at a distance. Do you want to invest in debt? Select only high-quality projects.

How to determine them?

  • A good product that will be useful in the future or is popular now.
    The usefulness of products in different areas is evaluated differently. If we are talking about platforms for DApps, the quality of the product will be evaluated in technical terms (how fast, efficient the network is and its advantages over competitors).
    In the game industry, blockchains and young DeFis, the community and its growth are more important.

  • Reputation. It is important to follow this parameter in all projects. Any scandal will worsen the attractiveness of the project. Hacks, incorrect team behaviour, failure to keep promises, and, worst of all, deceit. Projects like this should be avoided. They may be good for short-term games but not suitable for long-term investments.

  • The team. Who is on the project team? Can such a set of people realise their plans?
    If not, figure out why the team has such people. And how the project plans to implement its ideas. Cryptocurrencies from the top most often have a strong team and advisers, and consultants from related projects. It is important to pay attention to the team in young DeFi.

  • Project age. Think about the catch if the project is one day old and you are promised a million per cent. Some machines allow you to pump up the course.
    Keep in mind that growth can also be for fundamental reasons. This is especially noticeable in young projects since their initial capitalisation is low, and any positive news pushes the token price up sharply.

  • Liquidity.
    Can you sell your coin? Scam projects usually lack a liquidity pool. For example, you can buy a coin but not sell it.

Take these factors into account not to become a scammer.


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