Ever since the inception of cryptocurrencies, people started to speculate about their future value. The first crypto, Bitcoin itself was even designed to have a steady increase in it's value by limiting the maximum supply of the asset. Stories about people getting rich in a short amount of time with a relatively short amount of initial investment are responsible for attracting new crypto traders and holders with little experience and knowledge about cryptocurrencies and investment in general. That being said, I would like to present you five simple but very critical rules from my own experience (and mistakes) which can help you to make profits with Bitcoin and other cryptos.
Note, that this is not a financial investment advice, but rather my personal opinion. Cryptocurrencies are very volatile in their price and you could make high profits as well as total losses.
#5 - Learn the basics about cryptocurrencies and exchange trading
Before you put your money into crypto, educate yourself. Read articles about Bitcoin, cryptocurrencies and blockchain. You don't have to read the original Bitcoin whitepaper, but at least you should learn so much that you are sure you understand what you are investing in. Same goes for exchange trading. Learn the basics about trading, stock market and exchanges. Wikipedia-articles are a good start. If you see something you do not fully understand, try to investigate, use Google. Once you feel that your knowledge has been extended enough, you did your first important step before investing in crypto.
#4 - Never invest more you can afford to lose completely
This is very important. Understand, that you are investing in something that is relatively new to this world and is currently still not really that well regulated by public authorities. The world of crypto-trading is very diverse, is basically open for anybody with any amounts of money and the market is extremely volatile, especially if you are not investing in Bitcoin but in Altcoins instead. Fraudulent moves like Pump-and-dumps, exit scams and exchange hacks make headlines in crypto trading from time to time; something that would be an absolute show-stopper in other asset classes like stocks. Also, consider this: There are scenarios in which the value of a cryptocurrency, even Bitcoin, can go to basically zero. For example, imagine a severe software bug in the Bitcoin code that renders the asset useless as people stop to believe that anyone in the future is going to pay a higher price that they did. Think about how would you feel if you lose all the money that you are currently willing to invest in crypto with no possibility to ever get it back. Would you be okay with that? If not, reconsider the height you want to invest. Set percentage limits relatively to your current income, for example. As a positive side effect, you will get less nervous and make less trading mistakes in case your investments are going down in value.
#3 - Invest in coins/projects with promising concepts, teams and work
Anyone can make a cryptocurrency, especially since platforms like Ethereum allow everybody to create one on its blockchain (ERC-20 Token) with almost no effort at all. Also, most cryptocurrencies, including Bitcoin are open source, which means that anybody can access their source code and not only copy but also modify them to launch an own cryptocurrency. These are some of the reasons why there are so many cryptocurrencies; many of them are simply a copy and paste product with no intention other than to make money for the creators of the currency. Learn to differentiate between the good and the bad projects. A bad project can be identified by checking Google about any past negative stories on it, checking the project team (are they real persons and if so, would you trust them your money?) and, if you want to get more technical, understand the technology and/or code they are working on. In the end, scams and bad products will be worth nothing and you don't want to hold any of their assets in that case.
#2 - Avoid high fees
Currently, you can't buy most cryptocurrencies with real (fiat) money. You have to get Bitcoin (in some cases you can also choose Ethereum and other Altcoins instead) in order to be able to switch them to your desired crypto. That means, you will have to buy some Bitcoin or other Top-Altcoin like Ethereum with fiat money first. Many exchanges offer you that opportunity by allowing pairings like BTC/USD. However, exchanges charge you fees everytime you buy and often even sell cryptos for fiat. These fees are either calculated and stated out clearly during the trading process or are even hidden by simply adding or substracting a specific percentage to the actual price of a cryptocurrency. For example, you can buy Bitcoin at a price of 9,000 USD at an exchange, even though its real current price might be just 8,500. That higher price results because of the fee, that the exchange is charging you to finance their services. Do your own research about which cryptocurrency exchanges are offering the lowest fees for buying or selling. Currently, I would recommend GDAX (gdax.com) as it has one of the, if not the absolute lowest fees on buying and selling Bitcoin and some top Altcoins. After you purchased your Bitcoin with low fees there, you can move your asset to any other exchange or wallet you like. When it comes to trading with cryptocurrencies, Binance (binance.com) is currently my favourite exchange as its fees are also low and they offer a great variety of crypto-assets to choose from.
#1 - Buy red, sell green
Try to turn off your emotions when trading with cryptocurrencies. Analyze the price data of your desired asset carefully and find out, whether an asset is currently cheap or expensive, depending on the timeframe suitable for your investment. The closer an asset is to its all-time-high, the higher the probability will be, that the price of that asset will go down rather sooner than later. In order to make profits from trading, you have to make sure, that you always buy when the prices are relatively low and sell when you feel that the price is not going to rise a lot further in the near future. Sure, you could also speculate on long-term, simply buy in an asset and then wait for a long time, hoping that the past ups and downs are being overshadowed by a far higher price, similar to what happened to Bitcoin in the second half of 2017, when its price rendered the former price fluctuations obsolete. But even then, you would have made higher profits if you bought in at lower prices. Such an approach has a nice side-effect of worrying less about bearish markets (when prices are going down) as you see them as an opportunity to buy more assets cheaper than before instead of a threat for the assets you currently hold. Never buy in at a high price having a fear of missing out. No asset can rise indefinitely without corrections, there will always be a point where an assset will be going down and the probability for it to go down is definitely much higher the longer it has been on the rise before.