Investors seek methods to assimilate cryptocurrencies such as Bitcoin and other alternative coins into their conventional investment portfolios. Despite the crypto market witnessing a drop since the start of the year, certain crypto assets have traditionally shown strong performance. For instance, since its creation, Bitcoin has significantly outpaced the wider stock market.
However, Bitcoin, along with other cryptocurrencies, are speculative investments that possess their own unique risks which investors need to factor in. Essentially, as with any investment, have a contingency plan when contemplating digital assets, much like you would with stocks and bonds. Here are some essential investment strategies to remember while overseeing your cryptocurrency investments.
Implement Purchase Automation
Automating your cryptocurrency purchases can be beneficial for harnessing the power of pound-cost averaging. Most crypto exchanges, including platforms like Coinbase and Gemini, provide the functionality of setting up routine purchases.
In this scenario, crypto investors instruct the platform to buy a specified amount of their chosen cryptocurrency monthly; for instance, buying £100 worth of Bitcoin. This implies that they acquire slightly less of the currency when its price is high, and a bit more when it’s low.
This strategy alleviates the pressure of attempting to predict the market by purchasing a currency at what is perceived as the lowest price or selling at the peak price. It’s a challenge that even seasoned market professionals find difficult to master.
Focus on the Key Assets
The relatively complex and unfamiliar method of exploring cryptocurrencies could be daunting for many. These individuals might find it more suitable to stick with the main assets that have stood the test of time. BTC to USD is a prime example of an enduring asset conversion, having weathered numerous tough bear markets.
There are also several other significant assets with high market capitalizations, though predicting whether these will continue to exist in the future becomes increasingly difficult. This uncertainty extends to Bitcoin as well, though there is a general agreement that Bitcoin has already demonstrated its value and is worth consideration.
Avoid Investing More than You are Comfortable Losing
Every savvy and prudent investor will advise you to only put in as much money as you can bear to lose. This principle is universal across all markets, but it’s particularly essential in the volatile world of cryptocurrency, where values can plummet by double digits within hours. The investment landscape is not devoid of rash investors who gamble their life savings on a few stocks, but such a strategy is a sure route to disaster.
The cryptocurrency market has experienced both extraordinary growth and dramatic declines in value. It’s still an emerging market, devoid of regulatory oversight and grappling with early-stage technical challenges. These conditions can give rise to unfortunate scenarios, including hacks, fraud, and sudden sell-off orders that seemingly occur out of the blue. Investors are advised to allocate a small fraction of their capital, once again emphasizing only an amount they can afford to lose, to a carefully chosen set of cryptocurrencies.
Monitor the Volatility
Cryptocurrency values are incredibly unstable, potentially plummeting in seconds based on unverified rumors. This volatility can benefit experienced investors who can swiftly execute trades and thoroughly understand market dynamics, trends, and potential directions. However, navigating this territory can be highly risky for novice investors lacking these skills, or the advanced algorithms that guide these trades.
Consider the Bigger Picture
Numerous novice crypto traders aspire to achieve rapid success. Often, they harbor unrealistic hopes of becoming millionaires within a few short months. However, understand that quick profits from the market are not always guaranteed and maintaining a long-term strategy can help sustain optimism.
Long-term investment has proven a successful strategy favored by top-tier investors like Warren Buffet. However, this approach necessitates thorough research and analysis. Additionally, long-term investments demand great patience as they involve a buy-and-hold process. Many traders struggle to adhere to their long-term strategies, often choosing to exit trades once there is a 50% increase or decrease in their investment. This impatience can lead to missed opportunities for significant market gains.
Use Trading Bots
While trading bots can have their advantages in certain situations, they’re typically not suggested for novices seeking advice on cryptocurrency investments. In many cases, these bots are merely fraudulent schemes. If there truly was a flawless algorithm that could perfectly time your buying and selling transactions, it would be universally adopted.
Venturing into cryptocurrency can yield substantial profits, but it is not without substantial risks. Adhering to the following advice could help you make smart crypto investments and minimize your risk exposure. It’s crucial to conduct thorough research, select a trustworthy exchange platform, spread your investments across different cryptos, maintain a long-term outlook, comprehend the potential risks, and ensure the security of your investments.