Created by Ethereum co-founder Gavin Wood, Polkadot (DOT) didn’t take long to gain a following. It launched just over a year ago, and it has already made it into the top 10 cryptocurrencies by market cap.
People are excited about Polkadot because it allows multiple blockchains to run independently within a single network. With multiple blockchains operating on their own, Polkadot could solve many of the problems faced by other projects, such as network congestion and high gas (transaction) fees.
Perhaps you’ve heard about Polkadot, you like it, and you want to invest. Before you do, here are the mistakes to watch out for.
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1. Not doing your research
A popular acronym for crypto buyers is “DYOR,” which means “do your own research.” That’s important no matter which cryptocurrency you plan to buy.
If you don’t know much about Polkadot and you’re mainly interested because you heard that it’s going to be huge, take some time to learn about it. Go to the Polkadot website, read its whitepaper, and find out more about what its goals are.
It’s never a good idea to invest in something you don’t know much about. You may think about cashing out at the first sign of trouble. By doing your research on Polkadot, you can confidently decide whether you think it’s a good long-term investment.
2. Putting in more than you can afford to lose
No matter how much you love Polkadot, don’t spend all your money on it. Cryptocurrencies haven’t been around that long, and they’re highly volatile. In Polkadot’s case, it’s a year old, and the price has already swung by over 50% multiple times.
Polkadot isn’t the place for savings you have earmarked towards other goals, such as a down payment on a home. It’s definitely not the place for your emergency fund. And it shouldn’t make up the bulk of your investment portfolio.
A responsible approach is to make crypto 5% to 10% of your investment portfolio. You get to invest in crypto that way, without the risk of a dangerous financial hit if the price plummets.
3. Choosing the wrong crypto exchange
If you have an account with a crypto exchange that sells Polkadot, then you’re good to go. If not, you need to find an exchange and set up an account. Many exchanges don’t have Polkadot yet, so you don’t want to waste time creating an account with an exchange that doesn’t list it.
The easiest way to go is checking out the best cryptocurrency exchanges and picking one with Polkadot available. Here are two popular options:
Of the two, Coinbase is more suitable for beginners, and it’s the most popular exchange in the United States. Kraken is also a quality exchange with plenty of useful features, but it has more of a learning curve.
Your Polkadot investment could lose a big chunk of its value to start. If you go into it expecting to double your money or more in the first six months, you’re setting yourself up for disappointment.
Because of how volatile cryptocurrency is, there’s no telling exactly where the price will go from week to week. The entire market has risen and fallen after tweets by Elon Musk. To say it’s unpredictable is an understatement.
Only buy Polkadot if you’re ready to commit to it for five to 10 years. The point of investing in it is its potential, but results probably won’t happen overnight.
The process of buying Polkadot isn’t that challenging once you have an account with the right crypto exchange. Just make sure to do your homework on Polkadot, only buy what you can afford to lose, and don’t expect massive gains overnight.