The craze about the crypto space has been massive in the last couple of years. As an ardent investor or even if you are an amateur aspirant, the crypto trend has likely caught your eye. For good reason, analysts have been saying that crypto has grown to deliver promising return potential since its appearance on the financial market. These crypto-assets are defined by decentralized networks that are backed by blockchain technology. In other words, they do not confine themselves to the rules of a central authority i.e. the traditional banking system. Simply put, they are immune to third-party intermediations.
The crypto market is indeed very lucrative. However, they also involve the trade-off of volatility as with any other form of investment and are often impacted by market swings. As a result, they face market corrections from time to time. Therefore, you must be extremely proactive and do your own research before deciding on the right crypto assets for your profile. Conducting appropriate research and investing securely is a good way to expect potential returns on your crypto investment. Read on to grasp more about how you can sturdily build a sophisticated crypto portfolio and manage crypto risk effectively.
Why is there a Sudden Surge in the Mass Adoption of Crypto Space?
The crypto market has indeed managed to find its sturdy footing. While the concept of blockchain technology may have come into existence around 2009, it truly caught the attention of the masses in 2017. This new form of investing has enabled a market to explore more ways of getting into investing other than the conventional ways. A decentralized system, the crypto space may have seen dips but is also on its way to a new maximum.
Being a fairly new asset class, there are various new options being made available for the investors! In the past couple of tears, the crypto space is growing to explore several possibilities through Defi and NFTs. Metaverse on the hand is believed to be the next big thing after the internet. The crypto system is secure and controlled by the investor. All these factors have led a large number of people to explore the crypto market for fear of missing out on the potential valuable return or from exploring the new asset class. If we go by the trends, the demand among global investors is only likely to rise with time.
What are the Risk Factors Associated with the Crypto Space?
It is safe to say that the emerging blockchain-powered market is here to stay and thrive. However, some risks do interplay. Understanding them helps you power play the crypto asset game and drive good crypto risk management strategies. Some of the risks that surround the crypto space include,
- Getting entangled in the crypto market frenzy. Crypto assets are correlated to the crypto market and this dependency can lead to sudden market panics that bar exit.
- Market manipulation and fraud. The crypto market is highly prone to the effects of social information. Fake initial coin offerings (ICO) continue to float causing the risk of manipulation among naïve investors.
- It’s intangible nature! As much a con, the intangible nature of crypto assets puts them at risk in case of human error. Crypto fortune can be lost by the insignificant case of the inability to recall a password.
- Lack of clarity in terms of regulations in the space. This risk is slowly disappearing but continues to prevail at present.
As with every volatile investment market, the crypto space also carries a certain degree of risk. Striding through a safe and secure investment portal like CoinDCX ensures that you derive greater potential value and minimize the risks.
How can you Mitigate Crypto Risk?
We are at the top of the crypto hype cycle. Taking appropriate steps to mitigate the risk will allow you to enjoy the potential glistening returns on crypto assets. Let’s take you through the most effective,
- Develop a good sense of how the market functions. Closely reviewing the dips and peaks will also allow you to look beyond the bigger names of Bitcoin and Ether. Remember, the research must never stop.
- Read the whitepaper before investing. Easily available, it tells you everything about the asset. If the whitepaper does not contain enough specifications, treat it as a red flag.
- Time your investment smartly. The world of crypto is highly volatile and buying an asset at the right time will help proof your portfolio against shock waves.
- Be consistent. Make your regular investments through the Crypto Investment Plan by CoinDCX. This program lets you deposit a fixed amount into your CoinDCX app wallet every week for investing. It promotes discipline, lowers market volatility risk, and promotes long-term potential wealth generation.
How to assess Crypto projects to Manage Crypto Risk Effectively:
|1. Tokenomics | Market cap, supply and demand, and circulation|
|2. The crypto project idea, roadmap, whitepaper|
|3. Token use cases or applications|
|4. Social media proofs and News/PR|
|5. HNI and Institutional Interest|
|6. Project community: Founder, developer team, and users|
Read More: Which is the best crypto to invest in?
Importance of DYOR
As a crypto investor, you should be well initiated about your investment journey. Crypto experts have always emphasized the importance of being cautious about the hype. When you decide to venture into the crypto market, you must conduct in-depth research.
While Doing your Own Research(DYOR): Keep an eye out for the following:
Market capitalization databases: It will tell you which crypto is being invested the most in
ICO calendars: ICO calendars are curated calendars of new token sales
Block Explorers: Block Explorers can help you check address balances, track coin transfer histories, keep an eye on transaction acceptance, and monitor other statistics and variables.
Forums: Reddit is probably the biggest community in the blockchain space, but it can be the root cause of FOMO-driven purchases. Active conversations also take place on Twitter
Price Charts: Including line charts, bar charts, and candlestick charts.
News outlets: Make sure to read a variety of news outlets
The key result for DYOR is to acquaint yourself with all that the market entails before leaping. And as they say; the rewards precisely lie where the risks do. CoinDCX is your go-to app for all the happenings within the crypto space. Begin your crypto investment journey with CoinDCX, India’s simplest and safest crypto investment app.
Additional Read: Crypto Investing Strategy
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. In case you have any queries, write to email@example.com.
The above information represent the independent views of Primestack Pte. Ltd, Neblio Technologies Pvt. Ltd, and/or their affiliate entities and are for informational & educational purposes only. The content, information or data provided above is not an offer, or solicitation of an offer, to invest in, or to buy or sell any interest or shares, virtual digital assets/ crypto products or securities, or to participate in any investment or trading strategy. Any statement or communication made above shall not be treated as a legal, financial, investment or tax advice by the reader. The calculations, data, risk-return formulations, performance or market capitalization indicators captured above are based on the independent data sourcing including collation of public information and/or analysis performed by analysts, advisors or employees of Primestack Pte. Ltd/ Neblio Technologies Pvt. Ltd and/or their affiliate companies and/or any third party. Past performance is not indicative of any future results. The reader(s) are hereby advised to consult their financial/ legal/ tax advisor(s) before making any investment.