In recent years, cryptocurrencies have acquired a lot of traction which in return created quite the buzz in the investment sector. 2021 has been a fantastic year for most crypto tokens. An example of this would be the fact that for the first time ever the market topped at around $2 trillion of valuation.
However, the crypto market saw a big drop in May as a result of Tesla CEO Elon Musk’s statement and the Chinese market crackdown. The huge and abrupt price movements of digital assets demonstrate how unpredictable and volatile the crypto industry really is.
To become an expert investor, you clearly need a clever strategy. The uncharted world of cryptocurrencies may be extremely frightening, especially if you are a rookie investor. As a result, knowing a few clever tips and tactics is vital if you want to be a successful investor.
1. Diversify your Portfolio
A very useful way to improve your crypto investing skills is by diversifying your investment portfolio. Instead of limiting yourself to just Bitcoin, any investor should look into other emerging cryptocurrencies on the market. There are a plethora of cryptocurrencies and non-fungible tokens that are being launched right at this moment, however, researching and planning your investment strategy on the coin of your choice not limited to Bitcoin is extremely helpful. This is very helpful when a market experiences an unexpected fall since it enables you to have chances in other coins.
Additionally, when an investor diversifies their portfolio by investing in a plethora of digital currencies, they have the opportunity to gradually mitigate the possible risks involved with their investment. Investors can rapidly stabilize their profits by experimenting with cryptocurrencies other than Bitcoin. However, it is also critical to conduct thorough research before investing in cryptos with significant future potential.
A diversified portfolio is also preferred when the investor wants to explore the market even further. This also comes with advantages since if you spend a certain amount of money on each cryptocurrency you trade, you have a lower chance of losing your whole investment in the event of a rapid market change. A good investor always keeps in mind that the crypto market is one of the most volatile ones in the world and accounts for that in their portfolio.
Also read: Top 8 Cryptocurrencies to Invest in 2021.
2. Ignore the Hype
With the recent traction that cryptocurrencies have acquired, it is expected that this has piqued the interest of the general public and the media. Evidently, you can find various articles, news, and information on every social media or entertainment platform. You should not let them mislead you. Unfortunately, quite a few investors are swayed by these articles that, more often than not, don’t reflect correctly what is happening in the crypto market and may provide false or misleading information.
It is expected for this situation to lead to reckless trading based on entirely speculative and prejudiced judgments. A lot of the decisions taken after reading such articles are based on emotional judgments that very frequently result in losses. As with any other traditional investment, it is crucial for investors to never follow the hype and ignore any unnecessary noise. Listening to experienced crypto investors and studying the market on your own is guaranteed to be more beneficial.
Read more: 6 Tips for Investing in Cryptocurrency in 2021.
3. Do Your Own Proper Research
In today’s digital world, obtaining the correct information and informing oneself with the necessary knowledge is considered an easy effort. Thus, it is unacceptable for an investor to start investing their money on cryptocurrencies when they have limited to no grasp on the fundamental notion of blockchain technology and digital assets.
One of the best ways to improve your investing skills significantly is by doing a thorough research and read the whitepapers available online, for each and every single cryptocurrency you are planning to invest in. The whitepaper will include information like the developer’s intentions, precise dates, important token features, and a broad summary of the entire project. To some extent, reading the whitepaper attentively will offer investors a good understanding of the project and its future prospects. Furthermore, if the white paper feels inadequate or even misleading, that on its own will reveal a core problem with the project and act as a red flag. If the whitepaper fails to showcase why the cryptocurrency should yield sufficient profits, then the investor should consider a different investment opportunity.
4. Plan Your Investment Strategy
The majority of cryptocurrency investors are opportunist impulse buyers who invest without a plan. A comprehensive investing plan, on the other hand, is essential if you want to become a better crypto investor. It is very important to keep in mind what is the reason you want to be in this industry.
A good starting point would be to identify your strategy based on your investing style. For example, do you want to be a short-term or long-term investor, an active one or a passive one? Additionally, prepare your budget and implement particular risk management measures to assure less loss and a higher possibility of positive returns.
It is highly expected for your crypto investment journey to be unsuccessful if you do not have a backup plan. As a result, it is critical to have a comprehensive plan in place before entering the market. This will assist you in deciding how to move forward after a period of profit but it will also prepare you in case of unexpected losses.
5. Expect the Unexpected
It is widely known that the crypto market is a very volatile one, which means the likelihood of unexpected turmoil is increased. As a result, expecting the unexpected is a trait that every great cryptocurrency investor should include in their strategies.
Experienced and professional cryptocurrency investors are used to large fluctuations and adjust their strategies accordingly. However, there are also other approaches that may be taken, to efficiently deal with a market crash. Being prepared for such situations is vital since it will help you respond rationally instead of emotionally and adopting strategies such as buying the dip or holding on will also prove beneficial with responding sensibly in times of unexpected losses.
Check out more information on 5 Things to Consider Before Investing in Cryptocurrencies.
6. Store Your Cryptocurrencies Correctly
Cryptocurrency can be stored in either an online “hot” wallet or an offline “cold” wallet. Hot wallets are a more appealing alternative for novice investors due to their ease of access. However, hot wallets may be considered more convenient but unfortunately, they are vulnerable to hacking. On the other hand, cold wallets, when prepared correctly, cannot be hacked nearly as easily.
It is advisable to keep the cryptocurrencies that you want to save for a long period of time in a cold wallet, whereas you prefer to keep a small amount of crypto in a hot wallet since this will hold the digital currencies that you plan to spend on a regular basis.
If you are wondering which wallet suits best for your investment and preferred way of storing it, read this article on Crypto Academy for more information on cryptocurrency wallets.
It is important to note that a common mistake new investors make is deciding to keep their crypto in the exchanges instead of wallets. In that case, the investor does not own their keys since all their crypto exists on the exchange they use. This can be catastrophic in case the exchange goes down or gets hacked like in the Mt. Gox incident a few years ago.
7. Secure Your Cryptocurrencies
It is critical to keep your cryptocurrency secure when you purchase it. This is especially important if you have a hot wallet or if you plan to use your bitcoin to purchase goods. Basically, if you utilize cryptocurrency online, you must ensure the security of your digital currencies. That is why utilizing a VPN is highly recommended, so that investors can ensure the security and encryption of their online transactions.
Your internet connection is secured when you use a VPN (Virtual Private Network) and no one can see any of your online transactions because your data is encrypted. It is an additional layer of security that ensures your personal information and cryptocurrency purchases remain entirely anonymous. In addition, it makes it significantly more difficult for hackers to break into your accounts, which is especially important for those with large crypto holdings.
- By creating a diversified portfolio an investor has the chance to explore emerging cryptocurrencies in the market while mitigating the possible risks involved with their investment portfolio.
- It is much more preferable to listen to the opinions of experienced and respected crypto investors.
- Always try to find the whitepaper of your chosen cryptocurrency and consider how well or adequately it conveys important information in your investment decision.
- Investing strategies are vital when it comes to maximizing your profits and managing risks. Deciding on your style of investing as well as your investment strategies early, is a big step that will prove very beneficial.
- Always be prepared for sudden changes. Since crypto markets are characterized as very volatile, good investors manage to adjust their investment strategies accordingly.
- Hot wallets are more appealing due to their ease of access, while cold wallets are significantly more protected against hacks. Remember not to keep your cryptocurrencies on exchanges since there is a danger when it comes to the exchanges shutting down or being attacked.
- Using a VPN (Virtual Private Network) when buying cryptocurrencies or making transactions with them is extremely important since the encryption they provide and the extra layer of security help you significantly when it comes to staying anonymous and protected.