5 Secrets You Should Know About Cryptocurrency Investing
Investing in cryptocurrency can be like trudging through a maze if you don’t take the proper actions. Even when you feel certain about taking one course, it may lead you nowhere, especially when you misstep or don’t follow proper judgment. Therefore, there are certain things that both newcomers and seasoned users of cryptocurrencies must heed before they start to invest or re-invest in cryptocurrency.
These less-talked-about insights will also benefit those already in the midst of the crypto investment process. Here are the 5 secrets about investing in the world of crypto you don’t hear about too often, but should take note of.
1. Don’t Look Into An Altcoin’s Absolute Price
It may seem counterintuitive, but focusing an altcoin’s past price is something you should avoid. Although you shouldn’t completely disregard a coin’s history when choosing on which to invest in, past successes and failures are not always indicative of future ones. As such, you should not remove the money you will earn or have already earned from your crypto investments during a change in the market of the cryptocurrency. The few exceptions to do so include if you have too many high-risk altcoins or if you have raised a high amount of money and are content with it.
2. Choose A Cryptocurrency Based On Its Market Cap Not Price
It may well be attempting to invest in an altcoin in a bull market, but you ought to tread carefully. When investing, first consider the market capitalization of a coin, which represents the number of existing coins multiplied by the price of the coins. The price itself is merely the outcome of the total supply of coins in circulation. The market cap is an important investment factor to consider, as it will determine a coin’s supply, scarcity and ultimately, its value in the long-run. Before purchasing a coin, examine how many of it you are buying against its market capitalization. An altcoin’s market cap, especially its fluctuation, will dictate if your investment will gain or lose funds. For example, if you invested $1,000 in EOS and its market cap were to increase by 15%, you would gain $150.
3. Investing In A Diverse Crypto Portfolio Is Not Always Right
Crypto users are always being relayed the message to invest in a diverse portfolio of altcoins. However, this is not always fruitful to investing in the market. Cryptocurrency is not like other forms of investments, so this approach may falter. Buying a diverse portfolio of crypto is for those who want to increase their coin volume. But you must remember the speculative nature of crypto and that it can easily lose value. Plenty of altcoins make big promises that they can’t hold up. It can be difficult to determine which coins will yield a high ROI, so investing in multiple coins can multiply your risk.
4. Don’t Sell After A Short Period Of Time
“Buy low, sell high!” This approach of buying a coin when it’s cheap and selling it when it reaches a peak may seem thrilling and even logical. However, in reality, it is not conducive to a profitable investment in the cryptocurrency industry. The continuous swings in the market makes it hard to perceive what is a coin’s peak. This rings especially true when a coin’s value has short-term fluctuations. A good rule of thumb is to not sell based on a coin’s hype. Instead, hold on to a coin for longer periods of time, so as to not miss its peak or near-peak position.
5. Invest in Only As Much As You Can Lose
Cryptocurrency can be an exciting prospect for those looking to increase their wealth. But you have to keep in mind that it is a commodity; in March 2018, a U.S. federal judge ruled it to be so, and much like other commodities (stocks, bonds), it is subject to price fluctuations. In fact, altcoins can lose up to $35% of their value in a single day. For an industry with as many price fluctuations as crypto, you should therefore invest in a monetary amount that you are comfortable with losing. No one wants to lose money, but you should expect it as a looming possibility and thus only put in capital that won’t strain you financially should you lose it.
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Article Written By:
Lorraine is a multidisciplinary writer from Ibinex News, who hails from a background in marketing and SEO. She has obtained a bachelor’s degree in English Rhetoric and Journalism at Hunter College. Her journalistic ventures have included reporting for a community newspaper in the Bronx and writing opinion pieces for her college newspaper, The Envoy. Although she does not own any cryptocurrency, she finds the crypto industry fascinating and expects crypto to exceed fiat usage one day.