What should you prepare before investing in DeFi?

1. Understand the foundational knowledge

There’s a paradox that most newcomers entering the cryptocurrency market, in general, and DeFi specifically, do so with a "get-rich-quick" mindset without any understanding of the market.

They invest their own money but rely on the beliefs of others. When they lose money, they blame others instead of reflecting on themselves.

To avoid following this path, Theblock101 recommends that before entering the DeFi market, you must equip yourself with knowledge about the cryptocurrency market:

Understand basic industry terms such as blockchain, wallet, wallet address, token, etc. You can learn about DeFi terms [here].
Choose reputable platforms for transactions: Anyone can create a DeFi project on blockchain, so if you don't thoroughly research, you might end up trading on a fraudulent platform, leading to hackers taking all your assets.

2. Equip yourself with knowledge of investment psychology management

Trading psychology refers to the mindset and emotions of a trader while managing transactions in the financial markets. When investing or trading, the investor’s psychology and emotions can significantly impact decisions and outcomes.

Each trader has a different trading psychology, as it is influenced by their individual emotions and experiences. Some emotions that affect trading include doubt, hope, confidence, fear, greed, and optimism.

Trading psychology is a crucial factor in investment. If not well-controlled, it can lead to poor decisions and result in significant financial risks. Many investors suffer from FOMO (Fear Of Missing Out), leading them to buy at market peaks, and when they incur losses, they blame it on others’ advice.

Therefore, successful investors understand the importance of controlling their trading psychology and always focus on developing their skills and experience.

3. Learn about capital management skills

Capital here refers to the money you intend to invest in the DeFi market. Capital management is about controlling expenditures to make optimal decisions for long-term investment strategies.

Investors often manage their capital by dividing their trading accounts and diversifying their investment portfolios to control risks. From there, they can also optimize the profits earned from each transaction.

Never put all your eggs in one basket—divide your assets across different wallets:

Asset-holding wallet: This wallet's job is to hold assets and should not be linked to any DeFi applications.
Trading wallet: This wallet will be used to participate in DeFi platforms like DEX, lending, farming, etc. No system is entirely safe, so you should make it a habit to revoke the dapps you've connected to with this wallet.
Retroactive wallet: Participating in retroactive campaigns can expose your wallet to scam projects, so you should keep only a small amount of money in this wallet.

4. Prepare social media accounts

The social media platforms you should have when investing in the DeFi market are:

Twitter: Most projects today update their news and product progress on Twitter. You need a Twitter account to follow the projects you invest in, and on Twitter, there are many experts willing to share useful knowledge, which you can follow to gain more experience.
Telegram and Discord: These are the two most popular chat platforms for crypto investors. Here, you can chat with project admins and other investors. Additionally, some people use Telegram, Discord, and Twitter to participate in retroactive campaigns and hunt for project airdrops.

5. Be ready to embrace new things

The crypto and DeFi markets develop rapidly, with many new concepts and technologies emerging in just one year. If you’re someone who resists change, you can easily be left behind in this market. Therefore, being ready to embrace new things will make you more agile in investing.

A bird sitting on a branch is never afraid of it breaking, because its trust is not in the branch but in its own wings. The DeFi market evolves very quickly, with new knowledge emerging after each cycle. If you don’t want to be left behind, always have a mindset of continuous learning and self-improvement.

Follow Theblock101's articles to stay informed with useful updates about the crypto market.

Read more: