2017 was considered to be the “year of cryptocurrency” by many people following its rapid increase in popularity over all fronts. If you’ve been following cryptocurrency over the last few years, then you’re most likely aware of the high volatility and risk involved in investing as well as the success that many have experienced. As a plethora of new coins and platforms emerge in this space, here’s what you need to know to make your portfolio for 2018 as successful as possible.
This is not intended as financial investment advice.
This article will touch on key aspects and terminology of investing cryptocurrencies.
In this article
- Taking advantage of dips and historical data
- Benefits of a diverse Altcoin portfolio
- Comparing trading and investing
- Due diligence with ICOs
Don’t Fall into FOMO. Buy The Dip
FOMO: fear of missing out, Bandwagon Effect, Mob Mentality. Whatever you call it, it’s natural to want to involve yourself in the interesting hype that many people are taking advantage of. Knowledgeable investors should be aware of how quickly the fervor can cool, resulting in major portfolio losses. So when everyone is talking about the recent success of a particular coin that is at its all time high price, remain patient and consider holding your current cash positions instead of investing into a coin which is simply experiencing a temporary spike.
Instead, analyze charts and graphs to see where the average price stands for a coin over the last year. Search for the dips in prices and invest in coins when they are performing poorly compared to their usual performance. More often than not it will jump back to its equilibrium price range. Take BTC for example, as we witnessed its price moon to nearly $20,000 in a very short time. But just as quickly as it peaked, it’s price fell even quicker, and hasn’t reached prices relatively close to its ATH since then. Anyone who fell into that FOMO and invested has either cashed out and taken the loss, or is still holding onto that position in hopes of another price spike.
In case you do succumb to FOMO and find yourself in a situation where your initial investment in any coin is quickly depreciating in value, counter this by introducing a subsequent cash position when the price has dipped. Again, the key is to buy the dip or invest when prices are dropping which may potentially zero out your original loss. The goal here is to diversify your cash positions when investing in a coin and maximize your chances of long term profitability.
Review: Be patient, be aware, and most importantly be knowledgeable about the history of prices in the market. The LAST thing you want to do is buy in when the prices are high and see the value of your investment depreciate right away. In this case, green does NOT mean go and red is what we want to see.
Diversification: Invest in Altcoins
The allocation of your investment mix varies from person to person, depending on what you’re trying to get out of it. No matter how you diversify your portfolio, altcoins should certainly comprise a significant portion of it. With thousands of cryptocurrencies in existence, altcoins present a compelling investment thesis built on comparatively lower risk. The key here is finding the right altcoin to invest in from the multitude to choose from.
So how do you pick the best altcoin to invest in? Well, the best strategy is to do your own research and understand a few indicators which could preface a sustainable growth for the coin. After all, most altcoins are either at a relatively early stage or haven’t seen substantial growth over their entire existence. Ultimately, interpreting the altcoin market relies on your understanding of trends and market capitalization to maximize your returns. Follow their social media accounts, monitor its price, and be patient.
It’s extremely important that you perform your own fundamental analysis of the coin before investing in it. Unlike traditional investments such as those made in real estate, crypto-investments rely on your understanding of the company through their financial statements and overall viability.
- The first thing you should look into is its white paper, which will detail the coin’s function and mechanics while also giving you a good idea of how successful it might be.
- Next, read and stay updated with the coin’s blog or writing platform. This will also serve as an accurate indicator of just how professional and knowledgeable their team is. Follow their page or stay updated by continually reading their pieces.
- Last but no least, look for online forums and see what everyone is saying about them. Although doing your own research is the most important way of determining a coin’s viability, these community forums may provide information that you may have missed.
- At the end of the day, the more you understand about the coin, the higher the chances of picking the right ones.
Review: Perform your own independent research. Don’t waste your time watching random videos of other people receiving coins when you can do your own research. Chances are, you’ll find a diamond in the rough which many people are not aware of.
Don’t Be A Trader, Be an Investor
Unless you plan on spending all of your time in 2018 in front of a screen monitoring prices of coins, do not look for significant day-gains as your goal. Day trading isn’t a viable or sustainable system and will not be worth your time. Be aware of the volatility of the market and understand that meaningful returns on your investment will not occur in just a few days. Instead of parting ways with a currency once you’ve felt that you’ve made enough profit, consider selling a portion of your positions in case the price continues its positive trend.
Again, the key here is to be methodical in all your actions. Choosing not to invest at a certain time is just as valuable as buying the dip. Formulate a plan of when to sell once you’ve accumulated a specific return on your investment, but feel free to keep a small amount of your positions if you see a higher growth trend.
Review: Be as methodical and strategic as you can. Ask yourself: “Why am I investing in this coin?” Make sure you have tangible reasons as to why you believe the coin will be successful. If you truly buy into the coin and its purpose, make an investment and understand that you may reap the benefits over a longer period of time.
Be cautious of ICOs
If 2017 is deemed “the year of cryptocurrency,” then 2018 is most certainly “the year of ICOs.” As it becomes increasingly easier to create ICOs, more of them will ultimately end in failure or fail to maintain their success. According to a survey from news.Bitcoin.com, 46% of all ICOs in 2017 either failed to launch or are currently no longer in business following their launch. Expect this number to rise in 2018, as more scamcoins seeking colossal gains are launching in an attempt to secure investments from gullible investors.
Not only are ICOs unreliable, they are also a generally unsafe investment given the significantly higher risk of scams. Investors who pool in Ether or Bitcoin during a funding round more often than not end up with seemingly worthless tokens following the failure of an ICO. The fact that you’re not guaranteed anything should already serve as a warning flag for investing, especially if you aren’t fully confident in the value of their company.
If the risk and unreliability isn’t enough to scare you away, be aware of pre-ICO rounds. Usually, pre-ICO rounds are held to pool in large sums of capital to generate more interest or hype before the actual funding round. The best deals are usually found in the pre-ICO rounds, indicating that you won’t be receiving the best value for your investment. Finding and investing in a successful ICO for 2018 poses an arduous task, considering how many fail or are simply scams, but boasts the highest returns for those that can actually find success.
Review: Approach every ICO with skepticism. If a majority of ICOs end in failure, who’s to say that the company you are about to essentially donate to will be any different? Only invest in ICOs if you truly believe that you’ve done everything in your power to research them and make sure they are reputable and have real potential.
Regardless of these strategies, an intelligent investor is always informed. Be careful of where you find information online regarding crypto news and predictions. Social media influencers are often compensated with money or cryptos to promote a coin by publicly stating their affinity for it and its future success. Accurately forecasting the success of a coin or ICO is dependent upon numerous factors, making it incredibly difficult and unlikely that someone can predict its subsequent success. More often than not, influencers who are giving their “top coin predictions” are marketing for those coins, so be cautious of who you listen to and only rely on credible sources. As you DYOR, try to find neutral sources of information such as reviews instead of predictions and shilling.
Good luck out there and happy investing!
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