Cryptocurrency investment is a new and exciting way to grow your money. However, it is still a relatively new asset class and, as such, is subject to high volatility. But high volatility shouldn’t be an issue. Because for traders, price swings bring more opportunities to make returns, and for people who HODL, short time price swings don’t matter in the long run.
This article provides various cryptocurrency investment tips to help you navigate the turbulent market and make better investment decisions.
1. Analyze Trends to Make Better Decisions
Cryptocurrency markets are volatile and ever-changing. So the first thing you need to do to succeed with cryptos is keep up with the trends. It will help you better forecast the course of the market.
There are many ways to analyze trends in cryptocurrency markets, as discussed below –
1.1. Read about the types of cryptocurrency investments
Cryptocurrency investments come in many different forms. Purchasing cryptocurrency coins or tokens is the most direct way to invest in the market. However, there is also a growing trend of investors looking to get into crypto via various alternative means like Crypto ETFs or buying into stocks of companies directly or indirectly working in this sector, such as Meta (previously Facebook), Roblox, Nvidia, etc.
Each of these means carries varying levels of risk. Therefore one must study all the latest available options to get into crypto, evaluate the associated risks, and accordingly invest.
Another way to look at this is the more means to invest in crypto, the greater adoption might be seen.
1.2. Understand the volatility to manage risk
Volatility in the crypto markets could be caused by several reasons – Demand and supply mismatch, fundamental changes in the crypto project, any news, etc.
It is important for you to ‘not’ react basis just price fluctuations but rather go deeper into the reasons that caused them and accordingly make decisions.
For instance, a fundamental change in a crypto project is a genuine concern, and you should take the necessary steps to protect yourself from the damage it can do to your portfolio. Whereas a rumor in the news might not be something to worry about unless confirmed.
1.3. Make an investment strategy
Having an investment strategy in line with market behavior is very important. For instance, if the cryptocurrency market is rallying, one must have a solid strategy on how they will react to it. Will you continue to accumulate? Do you want to jump in with lump sum cash and get quick returns? Or will you stay neutral and not let the rally affect your decisions?
Similarly, in a bear market, what should be your strategy? Should you continue stacking your investments or put them on hold?
There is no right or wrong answer here. However, whatever you decide to do should be backed by a strategy and not abrupt.
2. Diversify Your Crypto Portfolio
If there is one cryptocurrency investment tip that you take from this blog, it has to be this. It helps you mitigate risks by spreading your capital across various crypto assets. Even if one of them goes down, it is anticipated that others will have your back.
One of the easiest ways you can diversify is Mudrex Coin Sets. These are themed collections of crypto tokens that thematically invests in the top coins of a category.
Coin Sets are also periodically rebalanced. This means that cryptocurrencies are added, removed, or their constituents are changed based on their performance to offer investors better risk-adjusted returns.
You can also go one level deeper and narrow your investments down manually based on the following points –
2.1. Diversify based on blockchains
There are many different types of blockchains, each with its unique strengths.
For instance, Proof of Work (PoW) blockchains are more battle-tested but very energy intensive and slow, while Proof of Stake (PoS) is less battle-tested but more efficient. There are also various other types of blockchains; these two are just the most popular ones.
Nobody knows which type of blockchain will make a dent in the world of decentralization. However, you can diversify based on blockchain types to get exposed to all of them and increase your chances of success.
2.2. Diversify among various crypto platforms
There are three things here –
- Always spread your assets among exchanges in different geographical locations. So that even if one exchange gets hacked or shut down, your assets on other platforms will be safe.
- Make sure your private keys are safe. If you lose your private keys, you will lose access to your assets. There won’t be any way to recover them. To keep your private keys safe, you can keep them on a hardware wallet or/and keep them in an encrypted file on your computer.
- The third step is to avoid keeping all your assets in one wallet. Because if you lose that wallet, you will lose all your assets.
3. Make Investments for Long Term
People looking at cryptocurrencies as a means to get rich quickly will have difficulty thriving in the ecosystem. One day volatility might bless you, and another day, it may take away all it has given you and more. And the only way to win the fight against market fluctuations is to have a long-term view of your investments.
You can use one of the two strategies discussed below –
3.1. Dollar-cost averaging
Dollar-cost averaging is an investment strategy where an investor buys a fixed dollar amount of a security at fixed intervals. This strategy is often used to reduce the effects frequent buying or selling can have on the price of a security. DCA can help you mitigate the impact of volatility and reduce your overall risk. You accumulate more when the market is down and less when it is soaring for the same amount, averaging your cost in the long run.
3.2. Buy the dips and HODL
HODLing refers to the practice of purchasing cryptocurrencies and holding them for a very long period. ‘Buy the dip’ is a popular investment strategy where an investor buys assets when experiencing a dip in prices and then holds onto them for the long term.
The thinking behind this strategy is that over time, the price of a fundamentally strong asset generally increases. So by buying during a dip, investors can purchase assets at a discounted price and then sell them later when the price rises.
FAQs
1. When should I sell cryptocurrency?
There is no definitive answer to this question, as it depends on various factors, including market conditions, your financial situation, and your investment goals. However, as a general rule, it is advisable to sell cryptocurrency when the market is bullish and prices are rising, as this is when you can realize profits.
2. What is the cheapest crypto coin to buy in 2022?
Price is not the best way to evaluate any crypto coin. The search for cheap coins may land you in a mountain of shit coins. If you don’t have enough capital, you can buy a fraction of any of the top cryptocurrencies for as low as a penny.
3. Is it worth buying $100 of Bitcoin?
It depends on your investment goals. What do you want to achieve by investing $100? It might be a good idea if you’re looking to invest in Bitcoin for the long term. However, for trading, you may require more capital.
4. Which crypto has more potential to grow by 2022?
There is no definitive answer to this question, as the cryptocurrency market is highly volatile and prone to sudden changes. However, some believe Bitcoin has the most potential to grow in the next few years, while others believe Ethereum could see the greatest growth. Ultimately, it is impossible to predict the cryptocurrency market’s future with any certainty.
5. What will be the worth of crypto in 2030?
An asset with as high volatility as crypto is very hard to predict. The value of cryptocurrency is affected by various factors, including people’s perspectives, government policies, global economic conditions, etc. However, with global mass adoption, you may see crypto making some strides.
6. What if I invest $10 in crypto?
Starting small allows you to spend more time in the market to understand its movements better. What counts is the research you put into your investments, even when the investment is as small as $10.
