Besides being just a random collection of words, these are amongst some of the most important cryptocurrencies in the world today. Unless you’ve been living under a rock, chances are you’ve at least heard of cryptocurrencies.
To the uninitiated, cryptocurrencies are digital assets which do not have a tangible form and exist primarily in the digital world. Bitcoin is the oldest and undoubtedly most popular cryptocurrency on the market today.
Having recently broken a new price record, investors all over the world have rushed to get on the bandwagon. All of which is well and good - if you know what you’re doing.
To help you along the way, we spoke to some of the most experienced crypto traders in order to nail down the basics of crypto investment.
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Here’s what we took away.
1. Knowledge is power
With so many cryptocurrencies on the market, it can be easy to get overwhelmed with so many options to choose from. While Bitcoin (BTC) may be the gold standard for cryptos, there’s nothing wrong with investing in silver.
One of the reasons why cryptocurrencies have exploded in popularity can be attributed to the rise of the blockchain. The blockchain is a special kind of database that utilizes cryptography to secure and encrypt records.
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All cryptocurrencies are built on a blockchain platform i.e. Bitcoin, Ethereum, and Ripple all utilize blockchain tech to record and process transactions. Previously, Bitcoin was favored by crypto enthusiasts as it allowed for funds to be transferred quickly at a relatively low cost.
As blockchain tech evolved, other more efficient platforms with their own cryptocurrencies began to appear. While these cryptos are nowhere near as prized as Bitcoin, they each have their own strengths that could make them a worthwhile investment.
This highlights why it’s important that you properly understand how cryptocurrency works before you get investing. The more knowledgeable you are, the more effective your investment decisions.
Click here to read about different cryptocurrency types.
2. Keep up with global events
While cryptos are decentralized and unregulated by government entities, this does not mean that they are entirely unaffected by the world around us.
As entire countries went into a state of self-imposed, the global market took a huge hit. In response, investors began snapping up safe-haven investments in precious metals such as gold in order to hedge the value of their assets..
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Along with this, BTC valuations began to increase as institutional investors took an interest in the crypto market. Despite the volatility, analysts recognized the value of investing in decentralized assets such as cryptocurrencies. This ironically led to a massive spike in Bitcoin prices as investors scrambled to fill their pockets with digital currency.
Now imagine if you had the foresight to recognize Bitcoin as a viable investment prior to the mass mad rush to buy up Bitcoins. Thus, highlighting the importance of keeping up to date on global events.
3. Have a model and stick to it
Investing is all about making the best decisions for your portfolio. In the rush to capitalize on a sudden price spike or a mad dash to avoid losses, you can easily find yourself acting irrationally.
This is why you need to set a threshold for profit or losses in your portfolio and act to liquidate non-performing assets. Keep your wits about you when investing and ensure that emotions never come into play.
Cut your losses when you’re able and never get greedy. Doing so allows you to manage your risk exposure and protect you from any sudden losses.
These are the 3 main rules of investing in crypto that you should always keep to. Being extremely volatile, the cryptocurrency market is no place for beginners. Fortunes have been made and lost in the blink of an eye on the whims of the crypto wave.
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