For the past two years, crypto investors’ experience has been fruitful. Even if the industry is volatile, investors remain unfazed and keep committing to long-term prospects regarding their investments. It’s an impossible job to try and predict what could happen in the future in the crypto market. But if investors want to maximize their gains, they must prepare in advance.
So, how can you invest in crypto without being left burning? Well, you can follow some basic rules that will help you minimize the risks and increase your chance of succeeding in your crypto game. However, it’s important to mention there’s no certainty when it comes to cryptocurrencies, so keep in mind to invest only what you can afford to lose.
Do your research
Research is a fundamental thing in the crypto market. It may not be as straightforward as investing in a publicly traded enterprise, but it’s still essential in the investment process. In fact, there’s a lot to say about researching cryptocurrencies, but this is not the scope of the discussion.
There are some principles that you should use to guide your research. You should learn whether the cryptocurrency in question has a unique use case, the technical elements of the specific project, and its potential to disrupt the industries that utilize it. But remember to stick to the basics all the time. Determine whether the project has an honest and transparent team and if the financials add up regarding allocation and expenditure towards investors.
Build a solid financial foundation
It’s not wise to invest in cryptocurrencies before building a solid financial foundation first. This means you need an emergency fund that allows you to cover up to six months of living costs and be on top of retirement contributions. However, if you need to pay down debt, that should be your priority, not your crypto investments.
An emergency fund can be very helpful if you face a financial emergency because you can cover it without selling assets or taking on debt. Suppose you’d spend a lot of money on crypto instead of adding it to your emergency fund. Wouldn’t you feel bad if something bad happened and you knew you put your financial cushion in crypto instead of a bank? Probably yes. You could lose your job, face a medical crisis, or anything else unexpected could happen. While no one wants to think of worst-case scenarios, it’s always best to be prepared for them.
Diversify your investments
Diversification takes several forms, including the types of assets you choose to buy and the individual assets belonging to each class. According to experts, you shouldn’t put a significant amount of your entire portfolio into crypto. You should also consider equity and real estate, which are lower-risk assets. How much you invest depends on factors like risk tolerance and, of course, your financial situation. Suppose you still have a long time until retirement, you may want to take more risks, as you’d have enough time to recover in case something went wrong.
People mainly invest in Ethereum and Bitcoin, which is understandable, considering that these two cryptos are the most established ones. The process itself is not complicated. For instance, you can easily learn how to buy bitcoin, but the real challenge comes in creating an effective strategy and investing smartly to avoid common mistakes and increase your chances of success. However, if you decide to buy smaller altcoins, it’s best to choose a mix of the most promising crypto sectors. Do your research to learn about a specific area; this will help you make an informed decision you won’t regret.
Beware of scams
Scams happen whenever money is involved, and cryptocurrency makes no exception. According to a report from the Federal Trade Commission, crypto scammers have stolen a lot of money since 2021, more precisely, $1 billion. Fraudsters take advantage of amateur investors new to the industry, so it’s paramount to be aware of the most common scams and avoid them at all costs. Phishing scams are among the most common, with malicious actors trying to access personal details, like crypto wallet key information. You can avoid these scams by not entering your data from an email link. Even if the link or website looks legitimate, make sure to always go to the site.
If you get an email about a lucrative investment opportunity, you should always view the offer with skepticism. It’s easy to fall for scams when all you can think of is how to make the most of your crypto experience. However, it’s important to stay rational and cautious, so you don’t become a victim of scams that could cost you dearly.
Store your crypto securely
The act of storage is just as crucial as investing when it comes to crypto. Investors often lose access to their exchange accounts due to security incidents. In the worst-case scenario, they also lose their funds. Therefore, make sure to store your crypto holdings safely.
Investors who take crypto seriously should consider using a hardware wallet. These wallets have extra security features that ensure your funds won’t be stolen. It’s never a good idea to hold cryptocurrencies on software wallets or exchanges – especially when it comes to an appreciable amount of crypto.
Think long term
Short-term trading is usually a recipe for disaster, as many investors lose money due to this mindset. Instead, you should see crypto investing as a long-term process. This will help you deal with volatility better, and you’ll be able to make smarter decisions. Look for projects that have good utility and are likely to perform well in the following years.
However, this is easier said than done because there’s a lot of uncertainty around crypto, and no one knows how the market will evolve. But this approach is still the best because it helps you keep your emotions out of your investment strategies.
The bottom line
Investing in crypto is not easy, as it’s still a relatively new space. However, by following these fundamental rules, you can increase your gains. You don’t have to be overly zealous regarding crypto investing; use common sense, and you’ll realize this market isn’t as overwhelming as it seems. Practice patience and let your investment grow over time.