Investing in cryptocurrency is exciting.
It provides a great opportunity for us to see great returns on our investments in a relatively short period of time.
As cryptocurrency is being talked about in the mainstream media much more recently, a lot of new money is entering the markets. This is great, but if you're a newcomer then there are a few things you need to think about before parting with your hard earned cash.
The following 10 tips should go some way to helping you avoid some costly mistakes in the market. It's something I like to think about on a regular basis to keep me from falling into avoidable issues.
1 - Never Invest More Than You Can Afford to Lose
There's a lot of hype around cryptocurrency at the moment.
In many ways, the excitement is justified. However, as with all investments, there's a chance that things won't go to plan for you. Crypto markets are volatile, and can switch between moving for or against you in a matter of minutes.
Investing what you're willing to lose is a great way to start out because it takes away the panic of a trade going against you.
Sadly, there are more and more stories appearing about people taking out loans to invest with, only to find themselves in potential financial ruin. Don't be one of these people.
It's okay to start small.
2 - Spread Your Risk
It can be tempting to go 'all in' on a single investment if you're confident in it.
This is generally a mistake because you can lose your entire investment pot in one go if things don't go to plan. Even if you've spent weeks researching a project, things can and will go wrong from time to time.
By spreading your investment into different projects, you're reducing the likelihood of losing everything. Try not to spread yourself too thin though, or you'll likely find it difficult to see worthwhile profits.
3 - Don't Give in to FOMO
FOMO, or the Fear of Missing Out, is a very dangerous thing.
We all feel it from time to time. There's massive hype about a project all over social media, and investors are earning huge profits.
You should jump in and reap the rewards, right? Not always.
In these instances, you should look at how far the project has travelled already. Buying tokens that are already at an all time high is a very risky thing to do as markets won't show green candles forever.
As is often said, what goes up must come down. That's not to say that it will come crashing down, but market corrections do occur, and it's often a healthy thing to happen.
If you're still wanting to invest in the project, then it could be worth looking for an entry point during a correction. That way, you're not buying at the all time high, and wondering what happened to your money as the market corrects itself.
4 - Say No to Greed
It's okay to take profit.
Let me say that again. It's okay to take profit.
Many of us have been there. Our investment is looking great and the value of our coins is increasing by the day. We wake up in the morning, refresh our portfolio, and find the value has decreased significantly.
These things happen. It's just part and parcel investments of this nature. Many of us continue to hold through parabolic rises in value due in part to the previously discussed FOMO, but also because we believe in the project's long term potential.
Learning to take profits at different stages can be really helpful in the long run. That's not to say that you need to cash everything out immediately, but if you've made great profit, why not take out your initial investment plus another 20% (or more) to invest elsewhere?
If the project continues to grow, you'll continue to see more profit from your remaining investment. Yet, if it stagnates or starts to decline, you've already walked away with your initial investment plus some more. It's a win-win scenario.
5 - Stay up to Date with the Overall Market
Don't worry, you don't need to keep track of the progress of every single project out there.
But, it can really help to try to stay up to date with how Bitcoin and, to an extent, Ethereum are performing.
As most projects are paired with Bitcoin, its current state can have an effect on how the paired projects perform too. For example, if Bitcoin goes on a large run or, alternatively, a large correction, the price of paired coins can increase or decrease significantly.
Over the last few months, I have noticed an increasingly large number of people being completely confused at what's happening with the price of the token they're holding.
"Why is (insert token) down?! Is it failing?", they'll ask over and over again on social channels.
Oftentimes, it can be explained by a temporary effect caused by the overall market. Keeping up to date with this will help you to view the overall picture much more clearly.
6 - Do Your Research
Research is one of the most important aspects of crypto investing. This is especially the case when it comes to altcoins.
Although there is a great deal of fantastic information out there, there is also a lot of rubbish. It's important to research the project you're interested in thoroughly.
- What does the project do?
- Do you believe in the project?
- Is it viable and what is the timescale for completion?
- Who is on the team?
- Do the team communicate well and answer your concerns?
- Does the project have a strong social presence, and is it genuine or just unsubstantiated hype?
- Is this a good price to buy in at and why?
Answering these questions before you part with your cash can save you a lot of heartache further down the line.
There are plenty of influential people out there trying to hype a project they're invested in and, oftentimes, the project is garbage.
Try not to get caught in a pump and dump scenario. Research the project, research some more, and then invest if you're still happy.
7 - Be Patient
Patience is a virtue.
This is true when it comes to crypto investments.
Try not to be a "When moon?" kind of investor. If you're asking these kinds of questions, you've probably not followed tip 6 above.
Many people seem to forget (or don't care) that what they've invested in is a project.
Worthwhile price increases will usually come from progress in the project. That could be an announcement of a major partnership, an exciting addition to the team, or simply progress with the product itself.
These things don't tend to happen over night. Have a little patience, keep an eye on the road map, and you'll sleep a lot easier without worrying about whether or not your token is going to rocket in price over the next few hours.
8 - Don't Panic
We've already touched upon the fact that crypto markets are volatile, and that it's often a healthy thing when a project corrects.
It can be easy to see losses in your portfolio and panic sell but this is usually the wrong approach.
In fact, people who panic sell will often then get a case of FOMO and buy back in higher than they sold. The market didn't create this extra loss, their panic did.
Relax. Have a look at the overall markets again, check out the social media channels, and try to piece together what's going on. The best policy when a market is dipping is often to hold and wait for things to balance out again.
Turn off the app, get back to your daily life, and come back to it again later.
9 - Learn from Your Mistakes
We all make mistakes. I've made loads.
The important thing is to try to learn from them.
Whether you're investing in a listed project, an ICO, or are looking to do some day trading, things will go wrong.
Don't beat yourself up about it. Instead, question if there was something you could have done differently to avoid the situation.
If the answer is yes, make those changes going forward. If the answer is no, there's no need to worry about it anyway.
10 - Have Fun
This might seem like a strange tip, but I think it's a worthwhile one.
Investing in cryptocurrency can be very fun. It's exciting to find a project you like the look of, or to open your portfolio to see lots of green candles and new profit.
Make the most of this time, and try to enjoy the experience. It could change your life forever.
If you're new to crypto investing, I hope these tips will go some way to helping you get started in the right way. If you're an experienced investor, then maybe you'll see just how far you've come already.
If you've found this post interesting, please upvote, resteem, and leave me a comment below. I really appreciate it!