5 Things to Consider Before Investing in Cryptocurrencies

With the rise in popularity of crypto in recent years, many people choose to jump on the ongoing trend and hype surrounding it, without the appropriate research and market considerations. Digital currencies have become a large part of investment portfolios for both retail but also institutional investors. Cryptocurrencies have always been characterized as unpredictable and volatile investments by analysts, but many investors still choose to ignore the dangers and caution disclaimers.

For any investment to be profitable, the necessary research needs to be done so that investors know what to expect when it comes to market behavior and recent trends, as well as be able to accurately predict future outcomes. This research is even more important in the world of digital currencies since the different cryptocurrencies can change their values quickly and unexpectedly, hence the high volatility and risk. Once an investor has decided to invest their money in crypto there are few things that need to be considered first.

1. What is the Reason Behind Choosing Crypto?

This is perhaps the most basic question an investor needs to ask themselves before actually handing over money on cryptocurrency investment. In today’s modern world there are so many investment opportunities and options to create a low-risk and more stable investment portfolio, so ask yourself why you are truly doing it.

Is it simply because you want to be able to participate in the crypto conversations that are going on in any social circle or is the trendiness that appealing to you? Maybe there is a specific digital currency that you have a compelling reason to invest in. Every investor has their own reasons backing up their choices, but what is important to remember is that many investors have lost large amounts of money by not taking it seriously and the crypto market is not one for games.

2. Make Sure you Understand the Industry!

It is very beneficial for investors who plan to invest in digital currencies to develop general knowledge about how the world and systems of crypto work. With a plethora of currencies to choose from it is crucial for every investor to be able to look beyond the most known ones such as Bitcoin, Ethereum, and Ripple. Every cryptocurrency has its own unique qualities and specifications, and investors should research them all to be able to choose the currency that best suits their investment style.

Moving on, understanding how crypto works is directly connected to understanding how blockchain technology works. Unfortunately, it is hard for someone with limited or no knowledge of coding and computer science to understand every aspect of blockchain technology, but with the right research, it is possible for a layperson to comprehend blockchain technology sufficiently.

After finding out about the details of each cryptocurrency and having obtained a sufficient understanding of blockchain technology, it is very fruitful for an investor to look into how each digital currency makes use of the blockchain technology and if there is any specific innovation that they provide to make them stand out from the rest. This way the investor will have a better understanding of how digital currency and blockchain technology work together, thus they will be able to identify if a potential investment is a worthwhile opportunity.

Also read: Top 10 Books to Read for Crypto Trading.

3. Read White Papers on Crypto!

While word of mouth and discussing with other crypto investors is important and beneficial, reading the “white paper” of each digital currency is even more vital. A “white paper” is the official informational document issued by a company to promote but also highlight the specifications of a product or service. This is also the case for every cryptocurrency project, if a cryptocurrency does not have an issued “white paper” then that can be considered as a red flag.

White papers should be easily found online, and they are very important documents to get crucial information directly from the source. They include the developers’ intention for the cryptocurrency project and a general overview, but also include details such as the timeframe and other specifics. Basically, the white paper is a chance for the development team to let the public know the who, when, what, and why of their cryptocurrency project. If a whitepaper does not include data and details about the project or it feels incomplete and misleading, that should be considered a reflection of the project itself.

5 Things to Consider Before Investing in Cryptocurrencies

4. Join a Cryptocurrency Community Online!

The internet has given the world the unique opportunity to be able to be in touch with anyone at any time. This means all the cryptocurrency enthusiasts out there can come together in virtual chat rooms to discuss, argue and exchange ideas about anything in the world of crypto.

By joining one of these communities that may be local or international, an investor is able to learn about the most current trends and compare their cryptocurrency portfolio with the ones of their peers and draw conclusions by discussing with them. One of the most popular examples of such a community is Reddit. There are a lot of crypto enthusiasts that have gathered together in the crypto Reddit forums that have active discussions around the clock. Of course, every investor is free to choose the community they feel more comfortable in since there are so many crypto communities online. 

5. Timing is Key!

After an investor has conducted thorough research on digital currencies and has gotten a general feel for the crypto industry, the next step is to find the correct timing to actually invest. This is especially tricky for the cryptocurrency world since everything is quite volatile and changes quickly.

The idea of buying into a new digital currency before it explodes in popularity as well as the value may seem like a smart decision, but overall, investors are more likely to find greater success through careful and detailed monitoring of the industry as a whole. Cryptocurrencies are known to follow specific price patterns. The most distinct example of this can be seen in cryptocurrencies that follow Bitcoin’s trajectory. When Bitcoin’s price rises or falls an investor can expect the same pattern to follow for other currencies that follow its trajectory. Furthermore, recent news about fraud, price manipulations, or exchange hacks will also affect the crypto environment directly. Evidently, investors should stay alert about news and changes in the crypto world since they can seriously affect their investments.


  • The most important thing to remember when investing in crypto is that everything is very speculative and volatile.
  • It is easy to idolize examples of people becoming millionaires overnight, but investors shouldn’t ignore the examples of people that put money in crypto only to see it vanish just as fast. 
  • Investing in the cryptocurrency industry always includes taking a risk. 
  • In school, you have a better chance to get a good grade by studying, in crypto you have a higher chance of success and profits by doing the necessary research before investing.