Investing in cryptocurrencies comes with its own risks as well as rewards. Therefore, you need to invest strategically in order to maximize your return on investment and minimize your risks.
There are specific strategies you need to adopt to ensure a successful cryptocurrency investment and building your portfolio:
- Understand the whole concept of cryptocurrency
- Spy on the market
- Invest in more than one coin
- Start small and scale higher
- Reallocate your investment
First of all, it is important for you to understand the whole concept of cryptocurrency.
Always keep in mind that you do not simply invest in something you are not sure and uncertain of. Do not jump on the bandwagon and follow what other people are doing just because you fear of missing out. For instance, a lot of people see their peers investing in property and they just follow suit in hopes to generate millions without even conducting prior research.
Therefore the first thing you ought to do is to study the space. These are the important points to be digested before kick-starting your investment:
- What is cryptocurrency?
- What is Blockchain Technology?
- What is Bitcoin?
- What are the other popular digital currencies?
- What are the coins market caps?
- How can you start your own cryptocurrency exchanges?
- Where can you make cryptocurrency exchanges?
Take your time to understand the realm of cryptocurrency and don’t rush the process. It may take weeks or even months to digest all the information but this step is imperative for you so you can be on top of the game and an expert in the field. This way, there’s a very low chance for you to waste your resources as you are familiar with the cryptocurrency industry.
The second strategy to invest is to spy on the market.
What does spying on the market mean? Spying on the market means you are observing what is currently working in the crytocurrency market. What you want to specifically look into is:
- What is the most sought after currency?
- What is the value of the currency?
- Which currency has the highest market cap?
- Should you buy and hold the currency for future investments?
Always remember that the cryptocurrency market is very volatile and the values fluctuate every now and then. The values usually depend on a lot of factors such as the speculators, the market demand, the supply demand and different institutions manipulating the prices.
My advice is for you to shop around and do not settle immediately for a specific cryptocurrency just because it has the highest value or popularity at the moment.
For instance, the most sought after currency at the moment is Bitcoin, but many professional traders and investors have predicted that Ethereum may surpass Bitcoin and become the currency of the future in the coming years. Therefore, always spy on the market and analyze the information.
The next strategy is to invest in more than one cryptocurrency.
It is not wise to invest all of your money into a single digital currency. A well balanced portfolio minimizes your risk as when you possibly lose on a cryptocurrency you own, you can still gain with the other ones you have.
If you decide to invest in only one currency for example Litecoin, what if the whole currency collapses? You’ll lose all of the money you have invested in a split second without any backups.
Therefore, always invest in 2 or more currencies. Constantly spy on the market and choose the currency you prefer.
The fourth strategy is to start small and scale higher as you go.
A lot of people assume you become instantly rich when you invest in cryptocurrency. However, that is not always the case. You don’t just become rich once you choose to invest in cryptocurrency. There’s a strategy and a learning curve to get where you want to be.
Therefore always remember to start small, especially for those who have a small risk appetite. As mentioned in the previous chapters, cryptocurrency values are very volatile in nature as it depends on many factors. The values fluctuate even more in this cryptocurrency season where many people are starting to trade digital currencies.
For beginners, the rule of thumb is to start investing $500 for your cryptocurrencies. You don’t necessarily have to start investing thousands! Now that you have your $500, how do you divide the money and what currency do you start to purchase first?
Firstly, remember to sign up for your digital wallet, and deposit your fiat currency and purchase the top 2 cryptocurrencies; Bitcoin and Ethereum.
The reason why we’re selecting the 2 is because they are the safest and established choice as compared to the other currencies. They are prone to fluctuation, but not as much for now.
So, you split the $500, and purchase $250 worth of Bitcoin and $250 for Ethereum. This is a smart way to do it and if there are chances of you losing any of your funds, the risk is still worth taking.
When you get the hang of it, you can scale your investment higher by purchasing your cryptocurrencies in a higher value.
Last but not least is to reallocate your investment.
Once you’ve completed all the steps from 1-4, which means you’re familiar with the cryptocurrency realm, you can reallocate your funds according to the digital currency market.
When you’ve started trading and investing, you’ll notice over a period of time some currencies will do better than others.
For instance, you’ve observed Bitcoin’s market and it has gone up whereas Ethereum has gone down, you can drag your funds to the higher currency market. This means, you can play around according to what’s working in the current market and constantly reallocate your money.
When you get the hang of it, you’ll realize that your investment will build up eventually from $500 to $1000, from $1000 to possibly $100,000! Always remember to do your part in getting to know more of the cryptocurrency market as there is always something new to look into. Be strategic in your investment and only investment in what you know.