10 Savvy Crypto Investment Tips Everyone Should Know
Everyone's talking about cryptocurrency and how they can make money off it. However, it's a lot more difficult than it sounds. Even those who made their fortunes off Bitcoin did so in a period of uncertainty. Few could have confidently predicted its incredible rise in value. Because it's so new, even after its rise to prominence, most people don't know how to make it work for them.
You might be in the same position. You might have the capital to invest, but you have no idea what to do exactly. Here are 10 tips that should help you get started:
Diversifying Isn't Always Good
A lot of people are going to tell you that diversifying your crypto portfolio is a good idea – and that is true. Putting all your money into one coin is terribly unsafe and limits your potential. However, it's also not something you just do for the sake of having more baskets for your eggs. If you are going to diversify, you need to do it right.
The best and only reason to diversify is to make more money. There's nothing more to it than that. If you put money on a coin, don't do it because you're uncomfortable putting more into your current target. Do it because you see the potential in that coin, and you want to get in on the ground floor to maximize your profits.
You Only Profit When You Sell
There's nothing that compares to the feeling of seeing your coins skyrocket in value. However, just because that happened doesn't mean you've made money. You don't actually turn a profit until you move value out of that coin. This is due to the volatility inherent in cryptocurrencies.
If things go well, don't rest on your laurels. Until you transform that value into a more stable form, such as a fiat currency, you haven't made a profit.
Don't Sell Out Until Prompted to Do So
For many people, much of cryptocurrency trading is dominated by emotion. Instead of making smart decisions based on market movements, people go with their gut. This often results in them taking more losses than they should, or making less profit than they could have.
If you're in a position to make a profit, resist the urge to day trade. Don't sell your coins just because you'll make a bit of cash. The only time you should sell is if the circumstances dictate that it's a good idea. Those circumstances depend on many factors, from your profit goals to any relevant news that could affect the coin's performance. Stick to the facts, and you'll do well.
Find The Most Efficient Way To Purchase And Store Coins For You
Cryptocurrency remains in its infancy, relative to other means of moving money. Best practices aren't quite set in stone, which means looking up a guide might not be as helpful as you need it to be. You will need to decide for yourself what the most efficient way to acquire and store your coins is for you.
How you acquire your coins depends on which ones you want to buy. Not all exchanges support all trades, so you'll want one that has all you want. You'll also need to do research. Not all exchanges are run ethically, and some may hold your coins hostage should the owners want to make a bit of profit for themselves.
Regardless of the coins you want, you will also need to get a wallet. Not only is this safer, it will also allow you to directly store brand new coins that aren't on most exchanges yet. If you're not planning on day trading and all you want is to occasionally buy and sell, you'll want to look into a hardware wallet, something physical. Not only does this keep your coins from being stolen should your chosen exchange be compromised, it also prevents impulsive decisions.
Focus On Profit
One of the biggest mental hurdles crypto traders run into is the idea of profit versus the idea of being right. It's a small difference, but it will affect your decisions. You don't just want to be correct in determining which coins will rise in value, you actually want to profit from them.
You could be correct most of the time, but if you don't invest in the right coins, you'll barely make a profit. Alternatively, focusing on profit pushes you to think not just of which coins will gain value, but which ones will do so the most. Again, a small difference, but it's the difference between small gains and making a fortune.
Use Fiat Currencies As Your Benchmark
Viewing cryptocurrencies only relative to each other is a recipe for not just confusion, but for disaster. Consider Stellar and Bitcoin. If Bitcoin rises in value and Stellar doesn't, you will naturally be able to buy more Stellar Lumens using it. However, that doesn't mean Stellar actually lost value, not in terms of fiat currencies anyway. Only the exchange rate between the two changed.
When determining a coin's value, stick to comparing it to fiat currencies like US Dollars. This will give you a clearer idea whether or not something gained or lost value.
A lot of people hesitate to buy their coins because of one simple reason – market manipulation. Everyone knows that due to lack of regulations, groups and companies can pull pump-and-dump scams over and over again until they get the profit they want. This can make buying coins feel awkward because it seems like you'll always miss out on getting them for cheaper at some point.
This fear of missing out is natural, but it's also something you should ignore. Predicting market manipulation or news-related dips is practically impossible. What seems like it should drive the price up or down will not always have the impact you think, if any at all. If you're buying at a good position – that is to say, it's lower than its standard value – don't hesitate. It's better to buy-in and miss out on a little dip than not buy at all and lose the opportunity when it corrects itself.
Manage Your Emotions
The most dangerous thing in your quest to trade and invest in coins isn't the unregulated landscape or the scams that run rampant in it – it's your emotions. When you trade in crypto, you're going to feel like you're on a constant roller coaster. Every time you look at the value of your coins, something will have changed. And those changes will likely make you nervous. If they lose value, you'll think about pulling out. If they grow, you'll start thinking about whether you should hold.
This emotional response is natural. Given that the history of cryptocurrency is filled with incredible spikes and crashes, it's not surprising that many flinch at every fluctuation. However, if you want to be successful and turn a profit, you need to ignore your emotions and focus on the numbers. Don't get distracted by fear.
If You're Not Sure, Don't
One of the best pieces of advice you'll get when investing in cryptocurrency is to only use money you're okay with losing – because that's exactly what might happen. It doesn't matter how promising the technology is, or how amazing the team behind it, there's always the chance that you'll lose everything you invested, and you need to be able to live on should the worst occur.
It is in this spirit of carefulness that you should also embrace the idea of sure action. If you're not sure about a coin, don't buy it. It's that simple. It's the fear of missing out that drives many to take risks, when really there's no reason to rush. There will be more coins. Dips that will let you enter at a later date will come.
This piece of wisdom also applies to selling. If you think you can make a little bit more, go for it. If you have no reason to think that it will dip when you're not looking, hold.
Focus On Coins Circulating Supply Relative To Maximum Supply
The law of supply and demand is in full force for cryptocurrencies. That's why pump-and-dump schemes still work. The more people buying a coin, the more its value will rise. This is why you can't just look at a coin and think it's a good buy because it's cheap.
Its value must be studied relative to its circulating supply. The closer the number of coins in circulation to the maximum number that can be mined, the more likely it is to rise in value. This is due to its lack of supply compared to rising demand.
Cryptoc Investment Tips You Should Know Conclusion
Cryptocurrency speculation and trading can be fun, even profitable, but it's also risky. Regulations could come in and change everything. New technology might invalidate all of it. Governments around the world might decide to outlaw it entirely. If you want to try your hand at it, you'll need to be smart. It's the only way you'll be able to turn a profit.