Investing in cryptocurrencies is something that was exclusively associated with tech-savvy investors not so long ago. However, over the years and as a result of changes in the economy and the regulatory landscape, more people than ever are looking to add crypto coins to their portfolios. In fact, the last year has been marked by growing institutional adoption, as companies and enterprises started trusting crypto’s ability to drive wealth and consolidate portfolios. It’s not just Bitcoin and stablecoins either, as many have begun looking into the latest ADA price prediction figures as well as the volumes and engagement rates of other altcoins in order to expand their lists of holdings and ensure they’re as robust as they can be.
However, compared to more standard products such as stocks or bonds, cryptocurrencies are still associated with much higher volatility levels. The fluctuations are the result of a combination of factors, including supply and demand, the decentralized nature of cryptocurrencies, and the changes and shifts occurring in both the larger crypto ecosystem and macroeconomics. However, the unique prospects provided by cryptocurrencies continue to draw investors who are willing to put up with a bit of risk in order to set things right.
If this description suits you, too, here are a few things you should know before you begin trading.
Don’t invest erratically
The cryptocurrency market is known for causing quite a lot of FOMO in its investors. Since values change so often, investors, especially those who are still new to the marketplace, are constantly worried that they could be missing out on a stellar opportunity that will take their portfolios to new heights. While it can be tempting to make bold moves in the crypto market, the slow and steady approach is much more likely to provide you with results. Having a strategy is also very important, so make sure to determine what your goals are and plan according to them.
Given the volatility of the market, you should remember that there’s a chance you could lose quite a lot in a single day. This can happen even during times when the marketplace is very strong, as that doesn’t make you immune to poor decisions. As such, one of the basic principles of trading is to invest only as much capital as you’re prepared to lose in case the market records a downswing. Having substantial emergency savings before you start investing is very important, and make sure to never use the funds you’re supposed to use for your rent, mortgage, utility payments, or groceries.
Do your research
Doing your research and being knowledgeable about the ways in which the market operates is a must in the crypto world. Since there’s no centralized authority, investors are much more responsible for the well-being of their portfolios, and they need to be aware of the metrics that guide the ecosystem. If you’ve invested in other products in the past, you’ll have a rough idea of how things go, but cryptocurrencies are still fundamentally different from their peers.
Go through the technical specifications, community engagement, competitors, and potential of each cryptocurrency you seek to bring to your portfolio. In the beginning, it is advisable to stick with the projects that have been around for a while and whose names are well-known in the crypto community before moving on to more obscure coins. The reason for that is that they are generally much more stable, can be used on ecommerce sites or turned into fiat, offer competitive advantages, and are typically much more transparent than their peers.
The cryptocurrencies that are better-known among members of the general public have generally demonstrated their resilience, unlike the smaller ones.
Pick the right storage
If you plan to invest a lot and plan on accumulating a larger number of cryptocurrencies, you’ll need to invest in reliable storage as well. Given the high value of cryptocurrencies, hackers are constantly looking for ways to extract the assets from the wallets of unsuspecting investors. Scams are also very popular, especially the ones where you’re led to believe you’ve just made a new friend (or even found a romantic partner) online. This is why it’s important not to share your passwords with anyone, regardless of how trustworthy they may seem.
If you want to make sure your holdings are as safe as they could possibly be, make sure to invest in a hardware wallet. While the software ones could seem like the preferable choice due to their accessibility, the internet access makes them vulnerable to malicious actors. Your recovery phrases must be kept somewhere safe as well, with many traders choosing to have them locked in bank vaults. Storing them electronically would be a huge mistake, but if you have no other choice, make sure to have it encrypted or at least password-protected with a very strong code.
Be careful which devices you use when using your wallet as well. The seed phrases, passwords, and secure backups should be complex and unique.
Keep up with the news
Things have always changed rather swiftly in the crypto environment, but now that the assets are increasingly being brought into the mainstream and regulatory frameworks are designed to include them in growing numbers, you must also keep up with the latest news in that regard. Major regulations and announcements from lawmakers will naturally affect the prices quite a lot. Changes in geopolitics or events occurring in the larger financial landscape can also make people more or less likely to invest in cryptocurrencies as well.
Remember to be disciplined and operate based on rules and indicators. Using more objective data for your decision-making is crucial and will drive far more value over the long term. On top of that, reacting to daily price swings is exhausting and will most likely cause you to make bad decisions. It is much better to go for the long haul instead.
To sum up, while cryptocurrencies definitely carry a risk and should be approached with caution, you can definitely make the most of their potential and grow your capital. All you need to do is be aware of where the market is going and have a strong strategy in place.
