The crypto market has taken people from rags to riches. At the same time, we have seen people lose more than half their wealth. It can seem crazy how a small tweet from the likes of Elon Musk can reverse the market gears. As though he is in the driver’s seat deciding the market’s final destination. This volatility and uncertainty can make even the most seasoned crypto investors and experienced traders doubt their investing abilities and feel apprehensive about the market.
Does it mean you should sit on the sidelines out of fear while watching your friends increase their wealth in leaps and bounds? Definitely not! In fact, the last thing we want to miss out on is a good investment opportunity. ‘Man, if only I had invested back then and trusted the market,’ would be the worst thought to have when the market is working its charm. Does this also mean you let the fear of missing out, aka FOMO get you to invest an entire chunk of your savings into the market? Definitely not! Again, the last thing you want to feel here is also the regret of staying invested. You don’t want to end up beating yourself for buying more cryptocurrencies.
So then, what should you do? Here are 6 cryptocurrency investment tips that can help you make the best investment decisions.
1. Invest what you can afford to lose
This is sound investment advice, but what does that mean? Does it mean you will lose what you invest? Wait, here us out! We do not mean to imply that you would end up losing the entire amount. What we want to say is that it would be prudent to start investing with that underlying assumption. Assuming that you could lose the entire amount would caution you to invest only the spare money you have. That’s the amount left with you after meeting all your financial obligations.
This involves some levels of budgeting. All you have to do is make a list of all the near-term expenses, short term, and long term goals.
Your near-term expenses can be:
Mortgage payments, groceries, paying insurance premiums, etc.
Your short-term goals might be something along the lines of:
Buying a new Tesla car, a vacation to the Maldives, and whatnot.
And your long-term goals could be:
Saving enough for a child’s education, owning a luxurious house….you get the idea, right?
So now that you know how much expenses you might incur in the future, you can plan your crypto investments accordingly. If you are a risk-taker, you can decide to fund your long-term goals by planning to grow your wealth through crypto investments. If you want to play it safe, invest in other securities to finance all your goals and use the amount left for your crypto investments.
One way to earn is through interest. Zipmex proudly presents ZipLock as a smart investing alternative where you can earn interest, similar to a bank but with a higher rate and daily bonus!
2. Be an active investor
Your job will not end once you invest the money in the crypto market. You should not just assume that you can sit back and relax while your money grows. You must track the market often because, as we said earlier, the crypto market is extremely volatile. You might miss out on your biggest buying or selling opportunity. Being an active investor would include you having to rebalance your investments.
Meaning, you might want to reduce the stake in one cryptocurrency and increase your stake in another cryptocurrency. Sometimes, it also means you might have to completely sell your crypto investments to profit from the market peak and later buy it again once the market falls. It all boils down to reacting and taking action towards the market news and indicators consistently.
3. Resort to averaging
Well, averaging can be your best friend or your worst enemy. It depends on what you want to make of it. In simple terms, averaging is buying or selling more cryptocurrencies at every market dip or each time the market makes a new high. Let’s say the market is reacting to the news and starts to fall, but you believe it will soar to new heights over the long run. What you can do is buy on every dip. This would eliminate the chances of missing out on a good buying opportunity and lowers your average cost per cryptocurrency, as well as selling.
If you strongly believe that the market might fall anytime, but it is increasing in the short term, you can sell portions of your investment each time the market makes a new high. However, you should stay cautioned and have a predetermined exit strategy in case the market decides to not favor you. Yeah, tough luck!
4. Do not put all your eggs in one basket
This old yet imperative investment advice holds true even with cryptocurrency investing. One of the rookie mistakes you could make would be to put all your money in just one or two cryptocurrencies. You would be exposing your entire investment to the risks associated with just a few cryptos, which is not really a prudent thing to do. To give you a real-life example, a tweet from Elon Musk caused Dogecoin prices to soar high. If you had ended up investing your entire savings right before there was a sell-off, you would have lost a lot of money you invested. But if you had diversified your investment to multiple coins, even if the Dogecoin performed terribly, the other coins that were performing well would offset the losses. And you wouldn’t feel the pinch as you would have in the previous scenario.
5. Do your due diligence
Are you someone who loves to jump on people’s advice? Hold your horses just yet. Unless you are consulting an expert, always do some research on the cryptocurrency. Dig deeper into what the purpose of the coin is, what are its future goals and weigh it against its peers to determine if the particular crypto is worth investing in. Do not be that guy who listens to a stranger or a friend’s advice blindly only to end up cursing them. We aren’t asking you to discount or undermine someone’s advice.
For all you know, they might have some really valuable information. We are asking you to fact-check if the advice is best for you. You should also keep in mind that the investment strategies that work for your friend may not be the best strategy for you. This is simply because everyone has a different risk appetite. You should definitely take your risk tolerance into consideration.
6. Don’t invest against the market
Make the trend your friend! If the market is continuously falling each day and you aren’t sure about the future direction, it’s better that you don’t buy in such a trend yet. Always wait for some signal which says there is a potential trend reversal. The signals could look like two to three days of upside movement and heavy buying volume, to name a few. If you plan to become a long-term crypto investor, learning to read chart patterns would come in handy in making investment decisions. This process is called technical analysis, and investing some time into learning this skill would pay dividends in the future.
We hope these six imperative tips will help you make better crypto investment decisions.
May your portfolio grow in leaps and bounds! Cheers!
