Most Americans have crypto in their portfolios, with over 16% of households investing in it in the last decade. While cryptocurrency is a good investment asset class, newbies joining the market must learn how to maximize their assets/ how to invest to minimize risks and optimize potential returns. Discussed below are the top four crypto investment tips.
1. Do your research
The crypto market is highly volatile and risky. As such, uninformed investors shouldn’t invest blindly or be carried away by the fear of missing out (FOMO) just because the market is thriving. Without research, you’ll likely suffer financial losses, especially after purchasing tokens at inflated prices. Research enables you to make investment decisions from an informed point of view. It helps you identify the coins viable for investment. You can determine if a specific blockchain/ token is growing through research.
During your research, consider how liquid a crypto’s market is and check whether it shows organic volume or price patterns. If you’re investing in a significant coin like Bitcoin, looking at the BTC to USD exchange rates can make it easier to budget for your investment/ know how much you need to purchase the coin. While research doesn’t guarantee successful investments, it equips you with the knowledge of the crypto you’re looking to invest in to better your decision-making.
2. Use a crypto exchange
Like a stock exchange, a crypto exchange enables you, the investor, to sell and buy in virtual currencies by providing the necessary tools. They make it easier to trade the cryptocurrencies you want with robust security features and low fees. Crypto exchanges are a hassle-free and easy for investors to purchase virtual currencies. They enable you to place legit trades on cryptos. Most exchanges have tax forms that make it easier for investors to compute their crypto taxes. Considering the many crypto exchanges available today, you should be cautious when choosing one to avoid getting into trouble, including scams.
3. Choose a crypto investing strategy
Crypto investing strategies are instructions/ guidelines that help you make investment choices, such as the asset classes to purchase and when to invest in cryptocurrencies. These strategies vary significantly. You can opt for conservative strategies focusing on low-risk assets and portfolios or aggressive ones with high-reward, high-risk investments. Here are a few cryptocurrency investing strategies to consider:
- Buy and hold: It involves buying a token and then holding on to it for a long time, irrespective of the short-term price changes
- Value investing: It assumes that most crypto assets are undervalued, meaning their real value is higher than they’re trading for. This strategy requires a lot of practice and research for those who want to earn a profit because you must identify truly undervalued assets
- Dollar-cost averaging: Investors regularly invest a fixed amount of money into the crypto market. This strategy insulates you from swift price movements by spreading your investment over time
4. Diversify your crypto portfolio
Diversifying your crypto portfolio spreads your investments to balance out losses should the market take a downturn. It involves investing across various crypto assets to lower risk and enhance returns. You can diversify your crypto portfolio by:
- Investing across cryptos
- Purchasing tokenized assets
- Investing in an ICO (initial coin offering)
- Considering crypto derivatives
Crypto investing is complex, especially for newbie investors. However, implementing these crypto investment tips can smoothen things.