The idea of digital currency has been around for decades, but the most important milestone of this industry is the creation of Bitcoin in 2009. Since then, the global cryptocurrency market has reached a worth of 4.67 billion USD.
Some people see the potential in the decentralization and various utilities of crypto assets, while others are interested in short and long-term investments in crypto as a way of increasing their income.
If you’ve decided that you want to invest in cryptocurrencies, there are some important rules to consider. The turbulent prices of crypto seem appealing, but you should approach it with high levels of patience and caution.
1. There’s no guaranteed profit
Nothing can guarantee that you’re going to earn money by investing in crypto. Although there are ways to increase the amount of currency that you have through staking, the market can fluctuate.
Prepare to have minimal profit, or even losses, once you start investing. With this kind of mindset, you’ll certainly make choices with more caution.
2. Don’t invest money that you need
Before you choose the currency that you want to invest in, you can buy Tether and keep it in an exchange or on your hardware wallet. The most secure way of holding crypto is on hardware wallets as they are almost impossible to get hacked.
On the other hand, exchanges can go bankrupt or get disrupted in other ways. While this happens rarely, you can never be too cautious. The upside of exchanges is that you can easily convert currencies from one to another with minimal fees.
Never invest your savings or money that you need in crypto. While earning more by investing more seems attractive, there’s a very high risk. This is especially dangerous during the bull market, as many people expect the prices only to go up. But you never know whether the price will continue increasing.
Never go into debt because you want to invest in crypto.
3. Diversify your investments
Just like with many other sources of income, diversifying your investments can help you be more successful in your trading career. As the crypto market can be very volatile and unpredictable, you’re lowering the risk of losing all of your money due to a drop in a single cryptocurrency.
This is especially the case if the single cryptocurrency in question is an alt-coin. By investing in multiple cryptocurrencies, you’re spreading the risk and increasing your chances of reaping profit if one of them increases. With this method, you’re also minimizing the chances of missing certain opportunities.
4. Invest in major assets
Yes, there are altcoins that increased their prices by more than a thousand percent, but there’s also a ton of them that rug pulled and made people lose their life savings. While the prices of Bitcoin, Ethereum, and Cardano are stagnating for some time, they’ve survived the test of time, and many serious investors have portfolios that consist only of major assets.
Bitcoin and Ethereum are dominating the market, and they are currencies with the largest market caps. They have high liquidity, which suggests that they are easily bought and sold, and you can trade them quickly.
Major assets are for people that want more predictable and stable investments.
5. Avoid fear of missing out
Fear of missing out, commonly called FOMO, suggests that you’re making impulsive investment decisions because of your emotional state. This often happens when the prices get a large increase or when a dip in price occurs.
Don’t be easily swayed by such occasions. Think long-term and avoid making decisions because of a current change in price. With cryptocurrencies, there are many external factors that impact the market, such as politics, global crisis, or when influencers start shilling for a project.
Expect dips to happen, as well as increases, but approach the market cool-headed and don’t try to catch opportunities that have passed. Instead, patiently wait for other chances to invest.
6. Be careful with new projects
New projects highly advertised on social media by influencers and news outlets pose a very risky investment. They often have a high level of volatility, and their tokens can achieve incredibly high prices, but they can just as easily crash.
These projects don’t have records of their previous successes, and while they can be advertised as having reputable backers, this can be fake.
Even if new projects are completely legit, there’s no guarantee that they’ll experience a widespread adoption.
7. There are no guarantees in crypto investing
While there isn’t a single rule that can guarantee you profits, there are a dozen of great pieces of advice that can help you minimize your losses. I can’t emphasize the importance of being careful when trading crypto enough.
Arm yourself with patience and do in-depth research on crypto projects that you want to invest in, as well as in exchanges and wallets where you would hold it.