Tips on How to Invest in Cryptocurrency

Adapting to new changes can be confusing, more so if it’s anything to do with finances. The situation is worse with cryptocurrency, a market that’s relatively new (only a decade old). While the cryptocurrency market is expanding at a rapid pace, many investors have remained silent and watchful. The situation is also worsened by the volatility of the market.

But with the industry leveraging on technology and all transactions being done online, it’s tempting to put both feet in, and many investors are beginning to give cryptocurrency investing a second thought.  But just before you go all in, it’s important to discover your tolerance level and risk appetite. Beyond that, many other tips will ensure you get started the right way, and we will be sharing these tips with you.

Cryptocurrency Tips

The following tips will help you make the right decisions:

1. Strategize

With the tons of cryptocurrency coins available on the market, it’s difficult to tell which is genuine and which is fake. According to a report in 2020 by Action Fraud, a UK fraud-alert site, the rate of crypto fraud increased by 57% to 5 582, with investors losing more than £114 million.

Before going on to buy Ethereum or any other digital currency, ensure proper investigations are done. Critically analyze the company and ask pertinent questions. How popular is digital currency? What do others say about it? What’s its history? The answer to these questions will help investors make the right choice.

Avoid cryptocurrencies that make lots of promises but have no concrete structure nor deliver anything tangible.

2. Risk management

It’s worth noting that cryptocurrency is a volatile market, and things may not always go according to plan. Hence, it’s important to have a backup plan and set aside money for rainy days.

Also, set limits on the amount you wish to invest and try not to go overboard. While many have gained from cryptocurrency, many have also lost.

3. Diversification

It’s never wise to have all your eggs in one basket. Just like stocks and bonds, it’s wise to have a diversified cryptocurrency portfolio. You could spread your funds across various digital currencies such as Ethereum, Bitcoin, Litecoin, and so on.

Having a diversified portfolio ensures investors won’t lose it all should the value of any of the currencies drop.

4. Long term investment

Bitcoin prices rise and fall and so do other coins. One day it could be good, and the next, it hits rock bottom. Amateur players often panic when this happens and are usually tricked into selling their coins when the market is low.

However, it’s important to note that cryptocurrency is here to stay. So, rather than sell at the slightest dip, holding it for months and even years could offer more rewards. While this is not certain, it’s more likely to happen.

5. Exchanges

All crypto transactions are processed through online exchanges that act as facilitators. These exchanges charge a fee for each transaction carried out. Many of these exchanges offer signup bonuses and reward milestones. Investors can also benefit from these. Just ensure you review the offers and decide which is best for you as many exchanges have different policies.

6. Have a goal

Before deciding to invest in cryptocurrency, be sure what you want to achieve with your investment. The goal should be realistic and in line with market conditions. Having a clear plan will help with quick decision-making. For instance, it will help you decide when to sell or when to purchase more currencies.

7. Automate crypto purchases

Just as stocks and shares can be purchased automatically, cryptocurrency can too. By enabling automatic purchases, investors can gain from pound-cost averaging. Cryptocurrencies such as Gemini and Coinbase enable users to set up recurring purchases.

The recurrent purchase involves crypto investors informing crypto companies to buy a fixed number of digital currencies every month. This means users get less of the cryptocurrency when the prices are high and more when the prices are low.

Doing this takes the stress off users as they no longer have to struggle to determine the lowest time to buy or best time to sell. It’s quite tricky, and even seasoned market experts are sometimes unable to get it right.

8. Avoid buying just because prices are low

A cryptocurrency with a low price may seem like such a great deal, but this is not always the case. Prices often crash because of several reasons, some of which may not be good. Many scam crypto companies deliberately crash the price of their coins to lure in investors, after which they sell their shares and take off, leaving the investors stranded.

Hence, it’s important to consider the user rates of cryptocurrencies. A fall in user rate often signifies the instability of a digital currency and should be avoided.