Since their launch, cryptocurrencies have experienced tremendous volatility. Yet, this unpredictability can lead to profitable opportunities if you’re interested in trading these digital commodities. Digital currencies like Bitcoin and Ethereum have soared vastly since their inception but are currently quite below their record highs, much like other well-known cryptocurrencies. While seasoned investors have been navigating the cryptocurrency market for years, you might be wondering how to initiate your journey if you’re a rookie in this crypto landscape.
Make Long-term Investments
Bitcoin’s price fluctuates wildly, causing it to dramatically increase and decrease daily, which often prompts new traders to sell when the prices are at a low point. For instance, individuals who acquired BTCUSD in late 2017 and offloaded it prior to October 2020 would have incurred a loss.
In cryptocurrency investment, those who exercise patience and adopt a long-term strategy often emerge victorious in the end. The presence of digital wallets is not fading anytime soon, so it’s advisable to keep your funds in the market for as long as you can to maximize profits.
Never Risk More Than You Can Afford to Lose
Any sensible and successful investor will advise that you should only invest what you can afford to lose. This rule holds true across all market types, but it is particularly relevant to the volatile cryptocurrency market, which can experience significant value fluctuations within hours. The investment landscape is littered with reckless investors who jeopardize their life savings on a small number of stocks, a strategy fraught with risk.
The cryptocurrency market has witnessed extraordinary growth and equally dramatic downturns. It is a relatively new market, lacking regulatory oversight and grappling with early-stage technical issues. These factors can result in unfortunate outcomes such as hacks, fraud, and sudden sell-offs that seem arbitrary. Investors should allocate a minor portion of their capital to a carefully chosen range of cryptocurrencies.
Diversify Your Crypto Portfolio
Having all your funds tied up in a single cryptocurrency isn’t advisable. In other words, diversifying your investments is key. Just as you would with equity, it’s wise to distribute your investments across various digital currencies. Doing so mitigates the risk of significant losses if one of them experiences a drastic drop in value; a common occurrence considering the high volatility of these investment markets. With thousands of options available, thorough research is crucial. Worldcoin and Safemoon are among some examples worth considering.
Automate Purchases
Just like traditional stocks and bonds, you can automatically convert ETH to USD to leverage the strategy of dollar-cost averaging. Numerous crypto exchanges, such as Coinbase and Gemini, provide the option for setting up periodic purchases.
This feature enables crypto investors to instruct the platform to buy a specified amount of their chosen cryptocurrency every month; £100 worth of bitcoin, for instance. This implies they acquire slightly less of the cryptocurrency when its price is high, and a bit more when the price drops.
This approach alleviates the pressure of attempting to predict market trends by either buying a currency at what one perceives as the lowest possible price or selling at the peak price. Even seasoned market professionals find this challenging to accomplish accurately.
Beware of Scammers
Fraudsters are perpetually seeking ways to swindle investors out of their funds. One should steer clear of deceptive airdrops, pump-and-dump schemes, and communications from social media profiles. Scammers often employ counterfeit websites as a means to defraud investors.
Before providing your personal details, verify the URL of the exchange site. Only download trading apps from trusted sources like the Google Play Store or the Apple App Store. While it’s advantageous to network with other cryptocurrency enthusiasts and influencers on social media, avoid making investment decisions solely based on their advice.
Endnote
Crypto investing is a great way to yield large returns, but the risk lies in making sure you are undertaking each step with precision. As long as you can keep track of the ever-evolving landscape and adjust your strategies accordingly, there’s no doubt that with the right tips and tricks, you will be well on your way to becoming an accomplished crypto investor.
