Cryptocurrency scams: what are the “5 golden rules” for investing safely

In an economy like Argentina’s, dominated by inflation and uncertainty, cryptocurrencies seem to offer the opportunity to make long-term profits or at least, protect the savings. However, before you start trading, it is worth knowing some of them golden rules fundamental for invest safely.

Over the past two years, a period of price volatility, industry regulations, million-dollar scams and the failure of some leaders have caused a reorganization of this ecosystem.

The global cryptocurrency scenario, as explained in Interactive brokersis characterized by extreme volatility, complex technicalities, and regulatory uncertainty that can be overwhelming for beginners.

Unlike traditional markets, speculation with these digital currencies has a double-sided: on one, the profit bursts are minted and on the reverse, the Millionaires lose.

THE cryptocurrency fraud I am currently the scam guy “more risky” in the United States, according to a recent report from the nonprofit organization Better Business Bureau.

Around 80% of Americans are victims of scams with cryptocurrencies and related investments they lost money. On average, $3,800although many lose “much more”.

Before creating a portfolio, the experts at eToro They emphasize that it always comes first set goals. Ask yourself what you hope to achieve with these investments. Are you looking for long-term growth, short-term growth, or a combination of both?

The specialists of Binance They point out that, if one advances with a strategic approach, one conducts research on its ups and downs, with careful and diversified allocation, the danger is substantially reduced.

To any beginner, “the market” seems to be a complex system that only a specialist can master, but the truth is that it all depends on people who they buy and sell. The 5 elementary rules are:

Minimize risks

Expectations that an asset will increase in price, without being based on technical analysis, are as random as gambling in a casino. THE risk management It is a discipline whose objective is to reduce the prospects of possible shipwrecks.

This methodology, applicable in various commercial sectors in the crypto world, helps to plan actions in advance, in order to protect capital and prevent losses from getting out of hand.

Volatility is one of the intrinsic characteristics of digital assets. The shock arises from phenomena such as supply and demand, competition, innovation, regulation, speculation, fashion, fear or greed.

These factors are changing and because they are difficult to measure, they can affect its value, both down and up.

Divided in half

‍No digital wallet can focus on a single product, a rule that also applies to cryptocurrencies.

A good strategy to reduce risks is divide your capital into different baskets of cryptocurrencieslike Bitcoin, Ethereum and the rest of the altcoins.

Diversification is a tactic mostly adopted by beginners. This approach reduces exposure to individual asset volatility and helps maintain a more stable overall portfolio.

The idea is that if one currency experiences a significant drop in value, others may still perform well, offsetting some of the losses.

However, putting together a portfolio is simple enough for most traders. The tricky thing is building a balanced cryptocurrency portfolio, something that requires some entrepreneurial skills.

Play safely

For those who are just starting out, the safest path is that of stablecoinsstable cryptocurrencies that do not fluctuate in value, because they are linked to a specific good.

For example, USD Coin is a stablecoin whose price is pegged at 1-to-1 parity with the US dollar, preventing its dissipation. They are backed by cash dollar reserves held in a bank account.

It is very common to use them as store of value to hedge against inflation, for local or international payments and also to invest in so-called decentralized finance (DeFi).

Another option is the large one consolidated cryptoassets, such as Bitcoin and Ethereum, which have a large market capitalization and are linked to a number of financial products based on them, such as ETFs and derivatives markets. Furthermore, these currencies have weathered several major cycles and downturns.

The most auspicious fact is that they have proven their resilience, unlike newer or small-cap currencies.

average cost rule

Bitcoin dollar-cost averaging, also known as Constant dollar planit is an investment strategy in which a fixed amount is purchased at regular intervals – it can be weekly or monthly – regardless of the variations it undergoes.

The idea is that instead of making a single large investment, you make several small purchases over time. This strategy distribute the risk and can potentially lead to better purchase prices.

The result is a disciplined investment approach that eliminates the need to make decisions based on short-term movements. This can ease emotional reactions to constant rocking.

Instead of obsessing over charts, automatically saving using dollar-cost averaging takes the stress out of determining the right time to buy.

The double face

A popular strategy among the more conservative is to buy and hold the tokens. This methodology is known in jargon as “Hold on Dear Life or HODL”.

Those who take this course as part of their financial planning remain committed to long-term benefits. This belief leads them to hold onto their coins through multiple price swings, believing that they will eventually gain value over time.

The opposite strategy is Day Trading, which bets on the short term. What buying and selling involves happens throughout the day. To move in this area, in addition to knowing the market, you need temperance and a bit of luck.

Traders using this option try to profit from small price fluctuations throughout the day. The goal of day traders is to generate profits from market volatility. Therefore, volume and liquidity are crucial.