Tips for investing in cryptocurrency

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If you haven’t already heard by now, the end of 2020 and the start of 2021 has been an exciting time for cryptocurrencies. With Bitcoin prices hitting all-time record high and breaking the $30,000 barrier, investors and crypto enthusiasts are understandably excited by the remarkable turn of events.

This coupled with political strife in the United States has sent shockwaves through the market. Now as investors rush to snap up cryptocurrencies of all kinds, valuations have gone through the roof.

Even investors with little-to-no cryptocurrency experience are understandably eager to get aboard. However, cryptocurrencies are a very different proposition. The extreme volatility of the crypto marketplace means that entire fortunes can be lost within just a matter of moments.

This is why we’ve prepared this guide to help even the most clueless of investors get to grips with the gold rush of our generation.

1. Know what you’re investing in

The first and most important rule of investing is to know what you’re getting yourself into. Sure you may have heard of BItcoin. But did you know that there are plenty of other cryptocurrencies to invest in. 

From Ethereum to Litecoin and Ripple XRP, you don’t need to invest in a single type of cryptocurrency. In fact, with Bitcoin being the literal gold standard in cryptocurrencies, many investors tend to overlook other investments.

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With Bitcoin prices being as high as they are at this point in time, you could in fact opt to invest in a selection of other cryptocurrencies available on the market.

While not as pricey as Bitcoin, cryptos like Ripple XRP and Ethereum have practical uses in daily life which can make them a potentially worthwhile investment. The fact of the matter is that investors should keep their options open and own a diversified basket of crypto investments.

2. Be prepared to lose

When you first start investing, only use funds that you’re prepared to lose. Despite all of your research and best efforts, investing is not without its fair share of risk.

This is why you should set aside a fixed sum of cash which you are entirely prepared to lose. Budgeting yourself allows you to avoid emotional decisions that could potentially compromise your judgement.

Many new investors make the mistake of treating investing like a gamble when it should be a strictly controlled risk venture. While you should never be aiming to lose, you should be prepared to make a loss initially. 

Learn from your mistakes and take corrective action when needed.

3. Monitor your investment

The cryptocurrency market is marked with constant volatility. Unlike the stock or forex trading, crypto trading runs for 24 hours a day, 7-days a week, non-stop. This means that an investor should be prepared to take decisive action quickly when it is needed. 

Keep up-to-date with the latest developments and keep a close eye on your crypto portfolio. Failing to do so will likely result in either missed opportunities or massive losses. 

You can start by reading what are the different types of cryptocurrency wallets here to keep your assets safe.

4. Set your goals

Sure the goal of any investor is to make moen – and plenty of it at that. However, there is more to setting your investment goals than deciding to turn a profit.

Firstly, you need to identify your risk appetite – are you willing to take on larger risks for a more impressive return? Or are you looking for stable investments on the long-term?

Next, ask yourself if you are investing on the short-term or on the long-term? Short-term investors typically favour highly liquid, volatile assets – thus allowing them to quickly leverage on market returns. A long-term investor favours less volatile assets that provide guaranteed returns in the future.

Only by answering all these questions can you develop an effective investment strategy that will benefit you.

Investing in cryptocurrencies is immensely risky but has the potential for amazing returns. This is why, you will need a sound investment strategy and a cool head when delving into this market.


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