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How to safely invest in crypto?

How To Safely Invest In Crypto?

The age-old saying goes in India, money attracts more money and the rich keep getting richer. When we lay the focus solely on the crypto industry, the statement stands to be true. But, best practices of investing are never to be forgotten. An investor has to see what he can do to safely invest in crypto.

An astonishing 300 million people from across the world hold cryptocurrency. Going by the media sources, 100 million of these people are from India.

However, one has to bear in mind that this one’s a non-regulated asset class. In case anything goes haywire in the field of cryptocurrency, the investors have little in terms of protection.

Similarly, all crypto transactions are discreet. Their origin stays untraceable over the crypto blockchain network unless the user is forthcoming.

Exercise discretion to safely invest in crypto

At all times and places, a crypto investor has to exercise discretion to safely invest in crypto. Regarding crypto investments, let us consider some do’s and don’ts to always keep in mind.

1.     Have limited faith in social media

Whenever we log on to social media, we are sure to come across one or the other celebrity endorsing one or the other cryptocurrencies. Otherwise, any one of the celebrities will be found demeaning a cryptocurrency with his/her statements made.

Overall, it is hard to believe too much, so don’t read much into anything. Instead, research on your own behalf. If you come across a crypto project that interests you, read up about it.

Invest only if you are sure about a crypto project and fully understand what it is.

Just as an instance, you are sure to have come across certain meme crypto tokens that made some serious profits in the past. The secret to the success of these tokens is the hype that others generated about them.

This phenomenon is known as ‘Pumped Up Community-Driven Trading Hypes’. But, you need not fall for this. Instead, invest in crypto only if you understand it truly and think of it favorably.

Then, one has to steer clear of self-styled advisors on social media. Zerodha is India’s largest stockbroker and Nitin Kamath is its CEO. He has tweeted that he loses heart when people invest blindly in cryptocurrencies upon seeing their preferred celebs endorse them. The celebs also endorse similar assets such as NFTs.

2.     Be discretionary of your neighbors’ advice

Among any two investors, some points of differences exist. So, do not pay too much heed to what your neighbor recommends. Instead, the factors guiding your investment should be your risk appetite, time horizon, expected returns, etc. An investor has to consider these factors to figure out if any particular instrument fits into the asset allocation or not.

Correspondingly, the approach taken toward making investments also has to differ. This recommendation stands true irrespective of the nature of investments that you make. It is not true for cryptos alone.

But, several investors, especially the younger ones are influenced by their peers’ opinions even while they do not understand the asset class well. It is a must to exercise due diligence when investing in crypto. Your friend’s success in crypto investing may not always transmit to you.

3.     Attempting to earn quickly may be counterproductive

The volatility of cryptocurrencies is remarkable and trade happens 24/7. Prices change rapidly. As Coinbase reports, a crypto investor holds on to his investment for a maximum of 93 days, on average. But, investors hold on to their stocks for years.

When investing in cryptos, one has to adhere to the basics of investing.

4.     Suspicious ICOs need to be avoided

ICO is Initial Coin Offering that bears similarities to IPOs or Initial Public Offerings. An ICO is when the first batch of tokens is minted by a company for mass public distribution.

But, there is an important difference between IPOs and ICOs that should be borne in mind. The companies issuing stocks during IPOs are likely to have a proven track record. This is not the case with ICO. All that they are doing is selling their vision for crypto to the investors.

So, one has to read the ICO’s whitepaper before investing. It may not be right to believe all that is being said in the ICO’s marketing and advertising copies.

5.     Be in cognition of your risk acceptance levels

Risk-free assets do not exist. Gold is the most valuable asset in the world, but that too comes with its own set of peculiar risks. The case is the same for cryptos as well.

So, before you invest, you have to be in cognition of the risks involved. Take the plunge only if you are comfortable with the risks.

Just as an instance, you should’nt be risking INR 1 lakh to make a profit of INR 500.

Macroeconomic factors render influence over cryptocurrencies. Rewards and risks always come together in crypto. So, an investor has to exercise due diligence and conduct his research before investing in any asset, not just crypto.

Risk tolerance levels for all investors are different, so, one has to be in a deep cognition of one’s own. Recognize how much risk is okay for you to earn any particular return.

These areas are tricky, so you should feel free to take the recommendation of a financial advisor as and when you intend.


In this article, we have discussed some ways to safely invest in crypto, always to be kept in mind. A few industry experts have the opinion that all investments in cryptocurrencies are speculative. Coming up with a fundamental value for any cryptocurrency is not easy. So, it becomes difficult to define if a cryptocurrency is overpriced or underpriced.

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