As the cryptocurrency market grows, so does the amount of information available. If you’re new to digital coins, start gaining knowledge about what cryptocurrencies are, how crypto owners trade them, and how successful crypto traders make their strategies.
To begin with, when having an investment portfolio, it’s a safe choice to diversify it to minimise the financial risks. When an asset’s price is low, another asset’s value may rise. When one is down, another is up, and so on.
The same goes for cryptocurrency, too. You can store some digital currencies long-term and be a day trader with others. You can be a long-term investor waiting for the big boom, or, why not, trade on a daily basis if you’re fond of price charts and keeping up to date on crypto market fluctuations.
If you’re interested in cryptocurrency and want to jump on the bandwagon, read the following helpful tips for a successful crypto experience.
Understand what you’re investing in
It’s crucial to understand exactly what you’re investing in, just like with any other investment. There are literally thousands of digital currencies available, each with different purposes and functions, and new cryptocurrencies are being created daily. Unlike stocks, where companies drive returns for you by growing their profits, many crypto assets have to rely on the market becoming more confident and optimistic for you to benefit.
There are well-known cryptocurrencies, as well as some you may have yet to hear of. Several cryptocurrencies govern others, like Bitcoin, Ethereum, BNB, etc. If you want to avoid the risk of investing in a digital currency you’re unfamiliar with, a piece of good advice would be to buy Ethereum. Take note: Ethereum, too, is a volatile asset, so figure out how much you can comfortably afford to invest. If you see that your asset value drops, you may be in a bull market. Wait for the bear market to come and see how much the price will rise then.
Use common sense
There are several crypto investment strategies. It would be best to be realistic when you commit to one. Some internet users endorse the Rupee Cost Averaging approach, which means you buy a specific amount of crypto at regular intervals. You may not even look at the price; you simply purchase it to accumulate for investment purposes.
Say you like the long-term perspective of Ethereum. On some coin exchanges, you can set up a schedule to buy the cryptocurrency every month, like a subscription. However, this isn’t good risk management, so don’t freak out if the value of the digital asset you’ve committed to decreases.
Here are three other types of popular crypto investment strategies:
- Balanced Portfolio. If you want to buy more than two cryptocurrencies, you can split the amount of money you want to invest into equal parts. It exposes you to a few currencies with the highest possibility of success at a reasonable price. However, remember that this strategy keeps you from maximising the investment in the currency that will outperform the rest.
- Unbalanced Portfolio. You could use the Unbalanced Portfolio Strategy if you’re set on some cryptocurrencies and think they’ll skyrocket. This way, you allocate money according to how well you feel each cryptocurrency will perform. Remember that this strategy requires extensive previous research because there’s a chance of getting the allocation wrong and not investing enough in the best-performing cryptocurrency.
- Profit Reinvesting. Once your portfolio is solid and profitable, consider investing in other digital assets with higher returns. As you know, the digital currency world is unpredictable, and new and promising competitors enter the market daily. This strategy may suit you if you want to commit to crypto investing.
Before you start investing, ensure you’re using a reputable exchange. Look beyond the fees and check the platform’s track record. You must choose a well-established, popular app, as these offer higher security than shady ones with few users. You can also read customer reviews to see if there are any red flags to be wary of. There’s no such thing as “too much research” when you’re trusting a website with personal data and money, so don’t forget that the security of the chosen exchange is crucial.
Also, when you buy cryptocurrencies, you’re likely asked to share personal financial information that hackers must not have access to. WiFi networks and public computers expose you to potential fraud. Therefore, your internet connection and phone are safer tools.
Grasp the risks involved
There are some risks you should pay attention to, like the fact that crypto payments come with limited legal protections. If a scammer gets his hands on your crypto, you may not have any real way to regain it.
While crypto scams exist (just like in any other industry or market), you can be wary of them and avoid being fooled. You’d be surprised how many times a day you avoid scams and how many there are on the internet. In 2021 alone, the NCSC detected and removed over 2.7 million scam campaigns from the internet.
Luckily, some crypto scams are so obvious it’s funny. Here are two examples of typical scenarios you shouldn’t take for granted:
- A suspicious message or email congratulating you for winning a large pot of cryptocurrencies or a rare NFT;
- A message or email threatening to reveal something compromising about you, like a video or picture, in case you’re not paying a certain amount in crypto.
If you want to be successful, you need to monitor your investments.
All in all, crypto isn’t free from risks, meaning you have to keep an eye on your investments if you don’t want to have surprises. Luckily, many tools and resources can help you.
Crypto portfolios, for example, help you track the value of your assets. You can also stay up to date by reading news, subscribing to crypto news websites, and joining a crypto enthusiast community.
If you want to be a successful crypto trader, staying safe and informed is key.
With a solid foundation in technology, backed by a BIT degree, Lucas Noah has carved a niche for himself in the world of content creation and digital storytelling. Currently lending his expertise to Creative Outrank LLC and Oceana Express LLC, Lucas has become a... Read more