Statistics have it that 14% of Americans have cryptocurrency investments. This is profound growth over the past few years, and there is even more speculation that this figure will increase exponentially in the coming years.
Newbies just getting into cryptocurrency investing are at a huge risk if not sufficiently armed with enough knowledge in the place of experience to make the best decisions.
The cryptocurrency market is a volatile one, and simply delving into its murky waters is akin to entering a battleground without as much as a bulletproof vest.
Whether you seek to invest in Bitcoin, Bitcoin Gold, Bitcoin Cash, Ethereum, or Dogecoin, the wise thing to do is to learn how to maximize value from your cryptocurrency assets. To this effect, you must look to maximize returns and reduce risk.
This article will give you some solid tips to go about it:
Tips for Cryptocurrency Investing
Whether you are a crypto veteran, or a newbie testing the waters, you cannot go wrong with these handy tips:
1. Diversify Your Portfolio
Risk mitigation is possible when you diversify your portfolio as a cryptocurrency investor. You can do this by spreading your investments across a wide range of digital assets.
Diversifying assets is important as it means that all of your eggs are in different baskets. In the event of a crash, you would not be too hit by the devastation as you would be if you invested in a single asset.
For instance, investing $1000 across as many as ten altcoins is much wiser than having all of your holdings invested in one single asset, e.g., Ethereum. In the event of a downward plunge in the value of ETH, you will incur damning losses in your cryptocurrency investment.
You may also be tempted to invest in one coin simply because it has proven its value and worth over a long period, especially when it has been projected to further increase in value. Here, it can be easy to give in to the temptation to invest in cryptocurrency in light of recent upward trends.
A good example is Bitcoin, whose value has been on the rise for a while now. Nevertheless, the volatility of tokens, in general, should be enough reason for one to exercise caution, and diversify the portfolio.
2. Stake in DeFi Liquidity Pools
DeFi stands for decentralized finance and is a way of storing up your cryptocurrency assets in autonomous platforms called decentralized applications. In exchange for this, you earn interest for your stake.
Decentralized finance is a unique area in the cryptocurrency industry. How it works is by incorporating regular financial services such as insurance and loans into the blockchain.
However, there is no middleman/third party in decentralized finance such as a Central Bank. Instead, the services are managed automatically by the community of blockchain users who execute special computer programs called smart contracts.
Crypto hedging aims to reduce losses and potential risks that may be incurred when cryptocurrency prices range unfavorably in the cryptocurrency market.
Hedging works by putting a primary trade against a secondary trade in opposing directions. That is to say, you place the main trade in the direction you anticipate the market to go, while the second trade goes against it.
Here, you cannot lose either way, with potential losses effectively offset even before the outcome is certain. When hedging, you can decide to go long or short.
4. Plan Long Term
As an investor, you can be duped into panic buying and selling when prices aren’t favorable. You should have a long-term strategy because the best rewards often come after a lengthy period of patient, strategic perseverance.
5. Don’t Buy Obscure Coins
There are thousands of coins out there. Don’t buy some obscure coin simply because of over speculation on social media. You can buy Bitcoin Cash, Bitcoin Gold, Ethereum, or any other popular coins that certainly have some promise.
Cryptocurrencies are an excellent investment, despite the volatility of the assets. For instance, with a well-placed investment in Bitcoin, you can benefit from the rising value of the number one coin in the industry.
Even if you start with the smaller altcoins, the profit potential is high, as long as you follow the precepts detailed above.