How to Invest In Cryptocurrencies: 2020 Beginners Guide
Why should you invest in Crypto?
Investing in Cryptocurrency gives you the opportunity to invest in the future, Crypto has proven to be one of the most resilient asset classes over the last few months. While it is true that volatility has been present across all asset classes, far from all assets have bounced back the same way. Various Cryptocurrencies have proven time and time again that they are reliable, easy to store, and have significant profit potential!
How to Invest In Blockchain Technology?
A Blockchain is secure, digital Ledger that records all transactions and has a system of finding a consensus between all participants in the system to confirm transactions. The key concept behind Blockchain is decentralization; in other words, the records are not stored in one place. Instead, the database sits on thousands of computers, ensuring immutability of records, data protection and preventing any potential tech hack.
Investing in Blockchain technology can be done by buying Cryptocurrencies, which are assets powered by Blockchain technology. However beware of some Cryptocurrencies, not all of them carry the same degree of risk. Nowadays you can trade thousands of coins and tokens on dozens of exchanges, but reality is that likely many of them won’t have value in the future.
Buying and investing in your first Cryptocurrencies these days is relatively easy. Most users initially start on platforms like Coinbase and Binance. There are ways to optimize your costs of buying crypto with Fiat, for example by making a bank transfer to your Coinbase account rather than paying with credit card. We will cover cost-optimized crypto buying in another article.
Why are Cryptocurrencies Risky?
The reason for the “risk” portion of Crypto is the uncertainty of its innovative concept. Putting an idea on the blockchain will not automatically make it successful. To be fair, Blockchain will solve many current obstacles for a number of Industries but for others, this technology is not able to provide solid and reliable solutions.
Moreover, many developers want to create the next Bitcoin, Ethereum, and Ripple, but creating something similar will not necessarily result in a successful concept. To understand more about a specific coin, you should read its whitepaper, which is essentially a document that explains the purpose of the coin and the technology behind it.
The whitepaper is written by the founder or developers of the project to help increase awareness in the coin or token. However, the contents are often purely technical, or too abstract. Nonetheless, reading a Project’s Whitepaper, should give you some basic understanding of a coin’s purpose.
Also, a project may apply Blockchain technology with a sound approach, and the idea could disrupt significantly the Industry where it will be applied. Yet, the team may not be able to implement as expected the roadmap or may face significant delays that in the end will bring the project to fail. Keep in mind that there are many competing Blockchain projects and only a few of them will emerge as a winner.
Finally, be wary of scams. Unfortunately, there are still plenty in the crypto world. Always keep your funds secure, use hardware wallets such as the Ledger, never share your private keys, use 2-Factor-Authentication on your exchange accounts and do not trust any Get-Rick-Quick scheme. Always do your own research before investing into anything.
Fundamental analysis of Cryptocurrencies
Fundamental analysis means to evaluate a coin based on its real underlying technology. It requires to gauge the potential of the project and the value it could achieve in the future. Then, you need to compare that price with the current valuation to assess if that is overvalued or undervalued. You may encounter a great project that is already fairly valued and that wouldn’t be much of a profitable investment.
The good news is that temporary hype and price volatility creates interesting buy-opportunities to catch on a daily basis. As there are no financial statements in the domain of crypto you can base your analysis on different aspects.
First, as discussed above, the whitepaper helps you understand a project deeper. Taking a look at the companies’ roadmap, community, use-cases and then getting in contact or checking the website to see progress could be a key aspect in determining if this crypto is a winner.
If you are interested in learning more about how to evaluate a Crypto project, this article will be handy. However, using this method to identify a winning Crypto in the long-term is no easy task and some people are more interested in the short-term.
Technical analysis is used to attempt to predict future prices using real-world data. This method helps traders to identify short-term trading signals. This allows them to select the proper timeframe for entry and exit, maximizing profits. More information about technical indicators in Crypto can be found here.
Keeping track of several indicators and studying several coins can be very time-consuming. Many prefer to use automated trading platforms like Coinrule.
Traders often use indicators such as Moving Average (MA), a technical analysis tool that smooths out the price data by creating a constantly updating average. Traders often track this by plotting several Moving Averages with different timeframes and examining their relations. A common “Buy” indicator between traders is an intersection of the 9-day MA and the 50-day MA. However, constantly tracking these indicators can be time-consuming and there are resources that can be used to make this process easier.
Automated Trading — Investing with auto-pilot
Automated trading platforms allow you to set up rules with your custom parameters to be executed. There are many platforms that provide this service, however, the one platform that has proven to be the most user-friendly is Coinrule. Coinrule allows you to automate all your trades, using technical indicators and price indicators as well.
The main advantages of using a trading bot are automation, advance planning, planned executions, and most importantly not needing to sit in front of a screen for hours on end to catch the perfect entry point. Another benefit is the lack of emotions involved, one can trade based on technical analysis, which the bot will act upon based on your preset parameters.
Lastly, never miss out on a price move in either direction! A stop-loss order will help you cut your losses while setting up the correct rule that can maximize your profits.
As seen in the image below, setting up a rule on Coinrule could not be any easier. The image shows a rule that buys and sells based on the crossing of the 9-day MA and the 50-day MA. This is an example of Golden Cross Trading, one of the most common, yet effective trading strategies in the long term.
The user-friendly interface allows you to set up the rule and sit back while it executes.
There are other ways to do this as well, many traders decide how they want to engage in the Crypto market and create rules based on their goals. If such an “active” approach doesn’t fit your investment needs, you may want to just accumulate your favorite coin in the long-term. Dollar-cost averaging is another popular approach that resulted in interesting returns in recent years.
For example, the image below shows a rule that buys X amount of Bitcoin when its price drops below USD $9,000.
You can now go from being afraid of volatility to taking advantage of it!
Using Coinrule can help you set up rules to profit off of price swings confidently!
You can create rules easily on Coinrule, activate them, turn them off at any time, and test rules on a demo exchange directly linked with exchanges such as Binance. With the help of Coinrule, volatility becomes your friend.
What is Coinrule
Coinrule allows you to create trading rules that run automatically across your favorite exchanges.
With Coinrule, you can quickly develop your own trading rules and strategies and set them up to run automatically. It is the “if-this-then-that” for cryptocurrency trading that allows you to plan your crypto trading rather than having to sit for hours in front of charts. Best of all? No coding skills are required, meaning anyone can use Coinrule.
Sign up for a free trial: www.coinrule.io
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Everything that I provide here is purely for guidance, informational and educational purposes. All information contained in my post should be independently verified and confirmed. I can’t be found accountable for any loss or damage whatsoever caused in reliance upon such information. Please be aware of the risks involved with trading cryptocurrencies.