Quote:

Decided to invest in cryptocurrency? Read our guide to avoid the most common rookie mistakes and not lose money.

Ten years after the emergence of the first Bitcoin exchange, cryptocurrency landscape still resembles the Wild West. For some, one good decision can reap profits of several hundred percent while others can lose everything in a single day. How can you protect your initial capital against exchange rate fluctuations, and your profit against fraudsters?

How to choose a cryptocurrency and minimize the risks

The first step is deciding which cryptocurrency you want to invest in. There are no hard-and-fast rules here; almost any token can soar one day and collapse the next. A novice cryptoinvestor needs a lot of luck to anticipate these movements. That said, you can take a few measures to protect your investment.

Total newcomers should choose a currency such as Bitcoin or Ethereum with a track record and demand among traders. Such currencies tend not to surge in price as quickly as altcoins (little-known cryptocurrencies), and in case you need to offload tokens in a hurry, you’ll have an easier time finding a buyer for them. You can view a list of the most popular currencies and their exchange-rate dynamics here, for example; higher market capitalization usually means lower risk.

If you’re an aggressive investor, sure of your abilities and prepared to risk your spare cash, take a look at up-and-coming altcoins. They are cheaper and promise faster profits, but they also come with disadvantages, such as low demand among traders, which, as mentioned, makes them hard to convert into real money. And don’t put all your eggs in one basket — invest in different cryptocurrencies to hedge your bets.

Read the small print

When selecting a cryptocurrency and an exchange, don’t get swept away by fantastically generous offers. Even in the unique environment of cryptocurrency investment, there’s no such thing as a free lunch. If you’re promised super profits, look for the catch.

Recall the cautionary tale of the Chinese service PlusToken, which promised investors a return of 10%–30% per month. More than 3 million people (many not in China) took the bait, making PlusToken worth $17 billion in its prime, in the spring of 2019.

Early investors did get their promised return, but others were less fortunate. The “revolutionary platform” was nothing more than a Ponzi scheme. Chinese authorities arrested some of the scammers, but most of the money vanished without a trace.

Most Ponzi schemes don’t go as far as PlusToken did, but that doesn’t mean their creators are any less crafty. For example, the XtraderFX platform, recently closed down in the United Kingdom, used well-known, trusted faces from the worlds of TV and finance to fraudulently advertise its services.

Typical signs of dubious cryptoprojects are:

• The people on the project team have no previous mentions in cryptorelated news. In some cases, the project team might even contain the faces of famous actors under different names, but that is rare;
  
• The cryptocurrency creators promise guaranteed profits. This smells of a Ponzi scheme;
  
• The project code repository on GitHub is almost never updated. That means either no such project exists, or no one is permanently assigned to it.
  

If any of the above apply to your favored cryptocurrency, rethink your involvement.
...