Acquaintance with cryptocurrency can easily end in loss of capital. However, this can be avoided if you follow simple rules.
The cryptocurrency market is a promising direction in the financial world. Large institutional investors invest millions of dollars in digital assets. Perhaps their demand for bitcoin will continue to grow, at least the stock market is preparing for this. Earlier, the largest bank in Singapore announced the launch of an exchange for trading digital assets, and the provider of leading US stock indices, S&P Dow Jones Indices, announced the development of an index for cryptocurrencies.
Therefore, it is important to get acquainted with the cryptocurrency market now, before their price “flew to the moon,” as predicted by the economist and author of the bestselling Rich Dad Poor Dad Robert Kiyosaki. But at the initial stage, you can make a lot of mistakes that can lead not only to a loss of capital, but also discourage the investor from working with a new class of assets. In this case, representatives of the cryptoindustry, together with the editorial board of RBC-Crypto, have prepared a series of tips that will help newcomers preserve their capital and increase it.
Invest in Bitcoin. This advice was given by the head of the fintech company Exantech Denis Voskvitsov. He explained that this is the "blue chip" of the cryptocurrency industry, which determines the mood of the entire market. Moreover, BTC is considered the new gold, as the "old" money of baby boomers is inherited by the younger generation - millennials. The latter are looking with much more interest at the digital coin rather than the precious metal. Perhaps this fact is behind the interest of institutional investors in the asset, and if everything is so, then the interest will be long and stable, the expert is sure.
Buy Bitcoin regularly and invest long term. Voskvitsov suggested investing a small amount in cryptocurrency on a permanent basis, for example, 5-10% of salary. And it is more promising for beginners to hold assets with long-term goals than to try to speculate. Strong price fluctuations can lead to panic selling of coins during falls and result in losses.
“This market is significantly less in terms of capitalization compared to the stock market, which means it is much more volatile. Often, investors lose their nerves, and they sell the asset at the lows and buy at the highs. Stop looking at quotes on a daily basis, follow the industry news. It saves you nerves and broadens your horizons, ”Voskvitsov explained.
From his point of view, cryptocurrency is one of the most striking financial events of recent times, and investing part of your portfolio in bitcoin is definitely worth it. If at least partially the forecast of the Citibank top manager about the growth of the BTC price above $ 300 thousand comes true , such an investment will be "more than profitable."
Invest in the most liquid instruments . Voskvitsov did not recommend that beginners invest in little-known altcoins. Yes, they can show strong growth, but at the same time, they are less resistant to falls. Therefore, if you invest in such coins, it is safer to do it through the purchase of indices or funds, the expert believes. He drew attention to the fact that Bitcoin is now trading near the historical maximum of $ 20 thousand, and the strongest altcoins are several times cheaper than at the peak of 2017.
Collect a portfolio of cryptocurrencies . This recommendation was proposed by the CEO of the EXMO exchange Sergey Zhdanov. In his opinion, if a novice investor is ready to patiently expect results from their investments in the context of a year or a couple of years, then buying several coins is the most suitable strategy.
Bitcoin, then altcoins. Zhdanov continued that the share of BTC in the portfolio should preferably be the largest. In addition to the main digital coin, you can buy popular altcoins that are at the top of the cryptocurrency rating by capitalization.
Rebalancing and no panic. Having collected a portfolio of cryptocurrencies, it is better to react as little as possible to information noise, Zhdanov emphasized. Also, the best solution would be to periodically rebalance the portfolio. For example, sell assets that have risen in price and buy those that have fallen in price by this amount.
Avoid little-known projects. Zhdanov advised not to invest in unpopular coins, even if they seem promising. It is important to be very careful and thorough in the choice of cryptocurrencies and not to forget that the higher the profit, the higher the risk.
Watch out for big players. If you nevertheless decide to invest in new altcoins, then it is more efficient to choose well-known projects in which large players are already interested, Zhdanov recommended. For example, you can check where stock exchanges or companies such as Pantera Capital invest.
Don't trade mindlessly . Novice users, seeing the high volatility of the market, often decide that they can make money on it. Zhdanov insisted that it is better for beginners to make deals only if they clearly understand the ratio of possible profit to loss. If you do not know at what price you will sell an asset if its price falls, give up trading.
Be as careful as possible with leverage. Margin leverage allows you to take borrowed capital from the exchange and use it for trading. On the one hand, this increases the potential profit. On the other hand, the risks are also growing. From Zhdanov's point of view, the amount of leverage should be consistent with trading experience, so beginners are strongly advised to use minimum leverage.
Voskvitsov, on the contrary, advised newcomers not to use borrowed funds at all. Leverage is a loan and is generally not free. Therefore, there is a risk of paying large commissions if you keep the position open for a long period of time. In addition, the cryptocurrency market is extremely volatile. In such conditions, trading with leverage is the risk of running out of money very quickly, the expert emphasized.
- Keep assets in dedicated hardware wallets. These are USB stick-like devices that are not connected to the Internet. Voskvitsov recommended storing digital coins in this way, or in local wallets on a computer and in an application on a smartphone. It is safer than using exchanges. They are at risk of being robbed or blocked by financial regulators.
Michael Ross-Johnson, CEO of p2p cryptocurrency platform Chatex, added that assets are best kept where there is confidence in their quick withdrawal. There are two reasons for this. First, the state is constantly paying attention to the crypto market, new laws are being created, and the requirements for regulating the industry are becoming more stringent. Secondly, if the price of a cryptocurrency starts to decline sharply, it is important to be able to quickly sell assets.
- Study the market . The novice investor needs to dive into the specifics of cryptocurrencies, Ross-Johnson continued. He advised to study the dynamics of the behavior of different assets, try to figure out what determines the growth and decline of their prices. This will help you learn how to predict the development of the market in general and for individual coins in particular.