Apr 20
Simple Strategies to be a Successful Crypto Investor
From learning when to buy and sell cryptocurrency to make a profit. And from making strategies to managing risks and losses, investing in crypto can be very stressful. And, to be a successful crypto investor can be even harder and nerve-racking so in this article, we are going to teach you how to be a successful crypto investor!
When it comes to investing in cryptocurrencies, some of the biggest challenges investors face are how to get started, knowing what cryptos to invest in and when to buy & sell. And of course, there is all the noise from the media, increasing the fear of missing out, and continually warning about volatility and uncertainty.
Once you have decided to invest in the cryptocurrency market, like any other investment, it is important to do your research before risking any money. So we will take a look at the things you need to know before starting to invest in crypto so you can become a successful crypto investor.
First of all, let’s start with knowing what crypto is!
Cryptocurrencies are digital assets created using computer network software that enables secure trading and ownership.
Bitcoin and most other cryptocurrencies are backed by a technology known as the blockchain, which keeps an incorruptible record of transactions and keeps track of who owns what. Public blockchains are usually decentralized. They operate without a central body such as a bank or government.
The term cryptocurrency comes from cryptographic techniques that have been implemented by developers to protect against fraud. This innovation addresses a problem faced by previous attempts to create a purely digital currency: how to prevent people from making copies of their holdings and trying to spend them twice.
Individual units of cryptocurrency can be called coins or tokens depending on their purpose. Some are designed as units for the exchange of goods and services, others are stores of value, and still, others function primarily to support the operation of computer networks that perform more complex financial transactions.
A common way to create a cryptocurrency is a process known as mining, which is used by Bitcoin. Mining can be an energy-intensive process involving computers solving complex puzzles to verify the authenticity of network transactions. As a reward, the owner of this computer can receive the newly created cryptocurrency. Other cryptocurrencies use different methods to create and distribute tokens, and many have a much lower environmental impact.
For most people, the easiest way to get cryptocurrency is to buy it on an exchange or from another consumer.
Well, buying, holding, and selling are the most crucial factors while making a profit out of crypto.
Cryptocurrencies are a volatile asset class that goes through many ups and downs. Because of this, people often get the idea that they should try to time their investment — buy within a certain timeframe to get the best price. However, with cryptocurrencies being traded 24 hours a day by investors around the world, the time to buy cryptocurrencies is never shortened.
If you want to invest in cryptocurrencies, it is best to practice dollar-cost averaging or DCA. This way, you buy little by little over a long period of time. Even if you invest in some intervals that are not too low, you will catch others that are very low and this could be an average.
So when is the best time to buy cryptocurrency?
In short and sweet, the best time to buy cryptocurrency is when you are ready to buy cryptocurrency. The dollar-cost averaging approach allows you to control the volatility of your own spending-at least to some degree and avoid rollercoaster rides. Buying in a declining crypto market allows investors to buy assets cheaply to sell them for profit in the long run. Cryptocurrencies are a new asset class that brings a lot of excitement.
Well, as we are talking about buying cryptocurrency, which is equivalent to investing, there comes a question of knowing the limit to investing in crypto. How much should you invest in crypto?
The answer is: Invest what you can afford to lose. Cryptocurrencies are speculative assets that can result in heavy losses. Just like with traditional investing, only invest in the crypto market what you can afford to lose. If you are unable to face the potential total loss of your crypto investment, it means that you cannot afford to risk the amount you are considering. Determining the risk tolerance of the crypto market depends on how much you earn and how much experience you have. Someone new to crypto should allocate less of their return on investment to the asset class than a dedicated crypto enthusiast or decentralized financier or DeFi expert. And note this article is purely for educational purposes, always please invest at your own discretion and what you are willing to risk.
Another ultimate rule of crypto investing is to Diversify Your Portfolio.
Putting all your eggs in one basket is not a good strategy in the crypto world. There is no point in investing too much in one cryptocurrency.
As with stocks and shares, divide your money between different digital currencies.
This means that you don’t risk being overexposed if the value of any of these investments drops — especially since the market price of these investments is highly volatile. A better strategy to minimize crypto investment risk is to have your crypto portfolio invested in various crypto coins and projects. There are many cryptocurrency and blockchain investments on the market, including the Internet of Things, irreplaceable tokens, DeFi projects, and various types of coins. You can even diversify with cryptocurrency exchanges, says Greenberg, because some exchanges don’t hold the same assets. By allocating their investments to different digital assets, crypto investors can reduce their overall risk profile.
Decide which cryptocurrency you want to buy and sell
It’s a fact, you will not be able to trade all 1,500 cryptocurrencies. However, you should be able to trade all the major currencies — including Bitcoin, Bitcoin Cash, Ethereum, Ripple XRP, and Litecoin — and new currencies are being added all the time. With so many people around you, it may be best to choose people you know and are experts in price movements, rather than taking a broad approach.
After buying the next thing to consider is: Keeping crypto safe
Once you have decided to buy a cryptocurrency and have determined which cryptocurrency to invest in, your next decision is how to store it.
This is an important choice. Crypto assets require a private key that proves ownership of the cryptocurrency and is required for transactions. If you lose your private key, you lose your cryptocurrency. If someone gets your hands on your private key, they can hand over your cryptocurrency at will.
Cryptocurrency owners use digital wallets to keep their assets safe. When it comes to digital wallets, there are many options to consider.
Some people choose to store their cryptocurrency on an exchange or platform where they receive it. This has several advantages. It gives complexity to the third party which brings some expertise to the table. You don’t have to keep track of your own private keys; All the information is there when you register. The downside is that if the provider has a security breach beyond your control, or if someone hacks your unique credentials, your cryptocurrency could be at risk. The On-platform storage is often used by people who think they want to trade immediately or who want to participate in stock exchange betting and rewards programs.
The next piece of advice that we can give you to become a successful crypto investor is: Take your gains often. This is the number one rule in crypto investing.
Experts say crypto market participants often need to win. It is a best practice to maintain a profit in your hardware wallet. In terms of profits, crypto investors often face the challenge that the price of cryptocurrencies can go down or up. Regular profits offset this risk over time. Many people buy it and keep it for an indefinite time and rely on celebrity news, memes and tweets. To better define your cryptocurrency profit strategy, it can be helpful to understand why you are getting into cryptocurrency, as with any investment. This way, you can determine your entry and exit points.
Manage risk
Of course, risk-takers are the money makers however, you must know how to manage or calculate that risk.
Some people who offer crypto trading tips may not suit your interests. So don’t bite yourself into making the same mistakes as everyone else. Set limits on how much you invest in a particular cryptocurrency and don’t be tempted to trade more money than you can afford to lose. The reward-to-risk ratio tells you how much you can earn for each unit of currency you risk. Invest only as much as you are willing to risk. Before investing in any cryptocurrency, make sure you study it and invest according to your capacity. It is not advisable to invest just because you feel left out or without consulting an investment advisor.
Prioritize liquidity.
Liquidity is an important indicator when deciding how to invest in the crypto market. The market moves fast, so crypto traders need to enter and exit positions quickly. This means that there must be a demand for cryptocurrencies for market participants to buy at the best price and make a profit if they decide to sell some of their wealth. You don’t want to buy an asset that may have great potential but is not traded and is just flat, so sits there and be under the control of the market. When measuring liquidity, it is helpful to look at the recent trading volume of crypto assets. The trading volume shows how much cryptocurrency has been bought and sold, indicating general interest in the asset.
Final Words
Cryptocurrencies are relatively risky investments no matter how you slice them. In general, risky assets should make up a small part of your overall portfolio — a general direction of no more than 10% of your total portfolio should be invested in crypto. You may want to try supporting your retirement savings, paying off debt, or investing in a less volatile stock and bond fund if you need the money in the short term.
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