While some have made millions to invest in digital currencies, others would call it degenerate gambling . If you're reading this, then you know how exciting and unpredictable the cryptographic world is. Fortunes are built and demolished in seconds, new and exciting technology appears every day, and controversy dominates the earth. It's pretty much the Wild West of Finance
The unprecedented growth of cryptocurrencies has attracted investors from all walks of life, many of whom have been seduced by the staggering returns of early investors. If that sounds like you, keep reading. Unfortunately, we will not teach you how to become rich in a few days; In fact, we will try to dissuade you from achieving this goal
It's not that we do not want you to be very rich, do not get me wrong. But we prefer to have more anchored goals and we want you to do the same. Investment is a difficult game and the sick person usually wins. Avoiding the "fear of missing" (FOMO) is essential, especially in crypto, where misinformation, false news and drama are commonplace.
So, what is the purpose of this article, you may be wondering? Well, today, we want to give new actors in the cryptosphere some ideas on how they can start navigating the delicate world of investment. We think it is important because of the increasing amount of scams and low quality projects out there.
We do not say that the strategies we are discussing are infallible or even profitable. They are not based on any mathematical formula and have not been designed by an experienced investment professional. These are simple ideas that are popular among newcomers and former investors in digital currencies.
It is important to note that this article should not be considered as investment advice and that you should always remember the golden rule: Never invest more than what you can afford to lose.
Diversify and play safely
This is simple. If your wallet has only one room, you are mistaken. Now, we know that some people will say that Bitcoin is the only cryptocurrency that you should own, but at this point, it's safe to say that it's an absurd statement based on feelings and ideals, rather than on actual facts
prosperous because it is the first and most popular cryptocurrency out there. He has the advantage of the first mover and he is also supported by an extensive network of miners who keep him safe. In terms of technology or features, however, Bitcoin is far from its peers. We are not saying that you should not have Bitcoin, but you should also recognize other cryptocurrencies.
It may be a good idea to play safely and to "bet" on the most popular ones. only coins, like the top 10 by market capitalization. At present, they are: Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, Dash, NEM, NEO, BitConnect and Monero.
Bet on the Idea, Not the Project
The world of Blockchain technology has evolved to the point where currency is just one of many functions that A cryptocurrency can have. There are smart contract platforms like Ethereum, NEO and Qtum, decentralized storage networks like Storj, Sia Coin and Filecoin and decentralized exchange platforms like Waves, Bitshares and others.
Our suggestion is, instead of buying a cryptocurrency in each category, you should allocate your investment among several options within each category. This will help you reduce the risk of investing in a single currency. In the world of crypto, a technical difficulty or even a grievance within one of the teams can lead to a rapid collapse of the price, whatever the promise of the project and the technology. Look what happened with Tezos
Hedging
Again, diversification is the name of the game. If you're in crypto, then you probably know just how much it's risky. The cryptocurrency movement could end in a few days if a major security breach was discovered or if all governments decided to ban it. The same can happen if a new and improved alternative to Blockchain technology arrives. These are, of course, the worst scenarios that are unlikely but nevertheless possible.
So, if you're not one to have all your eggs in one basket, you may want to expand your instrument investing strategy beyond crypto. Precious metals, stocks, and other traditional investment vehicles can be a great addition to your portfolio and will help you reduce the risk you would take by investing only in cryptocurrencies.
Some companies, for example, manage investments in cryptocurrency funds that combine cryptocurrency investments with investments in other sectors, such as real estate. We spoke to Kirill Bensonoff, CEO and founder of Caviar, of the importance of considering your investment in cryptocurrency space with traditional instruments.
He stated:
"We have found major problems with crypto-active investment, namely, it is difficult and time consuming, and all assets are highly correlated.There is no "security" asset that also produces income.We also see a move towards encryption of traditional assets, such as gold, real estate and others, and we tackle this question. "
Liquidity, Liquidity, Liquidity
This is something that many new players forget. You can end up investing in a cryptocurrency, increasing it several times, to realize that you can not really sell it. If you try to sell large quantities at once, you will plant the price. Why? Because there is no liquidity. If a coin does not have volume of transactions, large price fluctuations are inevitable.
You can play safely and avoid low volume parts, but if you do not want it, the least you can do is know the risk you are taking. CryptoCompare has a portfolio tool that allows you to analyze several risk factors in your portfolio, including volatility, exposure and, of course, liquidity. Their tool allows you to get an estimate of how long it would take to sell a certain piece based on the current volume. We asked Charles Hayter, CEO of CryptoCompare, why this tool is important for new users. He said:
"We want users to be able to see how they're doing, Crypto is risky to the extreme and we want to help people understand where these risks are and how to quantify them. "
Room to Grow
Remember what we just told you about liquidity? Well, this strategy is somewhat contradictory, but it's important to note that not all of these strategies are compatible with each other. In addition, some involve more risk than others, and this one is risky. So, what do we mean by "space to grow"?
Cryptocurrencies with a small market capitalization have more growth potential than those at the top. Of course, other factors will determine whether the price will rise or not, but the idea is that, if you invest in cryptocurrency before they're big, you could see your investment grow multiple times .
Before going to the nearest exchange and start stacking on useless coins, think about what you want to buy. Then do your due diligence, check the road map, check the team, read the white paper, learn more about the technology. Do everything in your power to make sure your investment is justified. It will also allow you to stick to your strategy, knowing that you are invested in something you believe in.
Technical Analysis
Yes, the magic of cards. To be honest, I have no idea how it works and I admire anyone who does it. All these numbers and lines give me headaches. Nevertheless, if you have it in you, learning T.A. can do wonders for your investment strategy even if you only touch the surface! We asked Jonathan Hobbs, CFA and author of the book Stop Saving Start Investing: Ten Simple Rules to Invest Effectively in Funds, how technical analysis can be useful even for a novice investor. He stated:
"Any good investment strategy needs rules." Technical analysis (or "TA") uses rules to look for patterns of price and price. volume in the charts in order to try to predict what will happen next.It helps investors choose when to buy or sell.An example of AT is the simple moving average (or "SMA"). SMA at 50 days, for example, is the average price of the last 50 days, which changes or "moves" every day.When an investment starts to trade above its SMA, this could be a bullish sign. Since AT can also protect the decline, it's a good risk management tool for volatile investments like cryptocurrencies. "
Interest proof of interest
Many people would like to invest in cryptocurrency mining, but at at this point, either you go big or go home. Mining has become an industrialized practice reserved only for those who have broad financial support, high technology equipment and access to low energy prices. Although there are several alternatives to traditional mining, Proof of Stake is the most relevant for the subject in question.
To put it simply, Proof of Stake allows users to extract parts without mining equipment. In this system, the amount of coins that a user holds determines the number of coins that he exploits. Although most PoS cryptocontrollers require you to leave your wallet open, some PoS implementations like Waves and Lisk allow you to gain interest by renting or delegating your bet.
Note that you should not go out and buy every PoS coin there. You should, however, check your possessions for these types of coins and, if you have them, the mines! In the worst case, you will have to let the wallet work, which can be done with any laptop or even with a Raspberry Pi.