As soon as we entered 2020, the feeling around cryptocurrencies resembles a lot that of 2017, when the interest around them was at an all-time high. This could mean that a lot of new investors will come into the fold, benefitting the market with new liquidity. But it also poses a challenge – showing that we’ve learned from the mistakes around the subsequent 2018 crypto crash.
Errors of judgment when dealing with cryptocurrencies could start mounting – again. So it’s vital that everyone interested in buying cryptocurrencies learns how to protect themselves from the most common mistakes. It doesn’t matter if you’re an expert engineer, a member of an IT staffing company, or an executive in a tech firm. If you haven’t dealt with cryptocurrencies before, these are the 3 things you have to do (and the 3 you absolutely don’t) before investing in crypto.
Remember the whole “don’t put all your eggs in one basket” thing? Well, that saying is still going around because of one simple reason: it’s true. Betting everything you have on one single thing is never a smart move – and it’s especially true when it comes to cryptocurrencies.
By diversifying your investment portfolio, you’ll be reducing your risks. The main one you’ll be avoiding? Volatility. Cryptocurrencies are widely known for being volatile since they are very sensitive to unexpected market swings. Other risks mostly affect in-development projects, which might fail midway, turn out to be scams, or be forced to close down due to new or uncontemplated regulations.
Diversifying your investment isn’t just throwing your money towards any crypto you might find. There are things to consider. For instance, if you have under $500 in cryptocurrencies, you should invest in just 2 or 3 coins or risk losing a lot of money in trading fees. Also, you should know about the possible groups in which you can invest, including Bitcoin, Ethereum, Passive Income Earners, and stable coins like Tether or Facebook’s Libra.
When investing in cryptocurrencies, you’ll be reading articles, checking information, and analyzing multiple variables. That’s especially the case before you make your first investment, as you’ll surely want to get it all right. And one of the things you’ll surely be following more closely is the price evolution of the cryptocurrency of your choice.
That’s more than commendable because you’ll be waiting for the right moment to buy. Now, if you decide that the ideal moment for investing has arrived and you buy crypto, there’s one problem you should avoid – obsessing over the price evolution. This is more common than you might think, as people buy and keep checking how the price fluctuates right after that.
That’s a problem because every little change might tempt you into falling for impulsive buying or selling. If you see prices dropping, you might feel like it’s time to buy some more If you see prices soaring, perhaps you think you can already sell. Though you might end up being right in the end, chances are that rushing decisions will hurt your prospects. So, don’t obsess over price fluctuations, especially after buying. Trust the decision you took and keep analyzing rationally.
Keeping track of your investments is the healthiest and most obvious thing you can do after buying crypto. However, being that the crypto market never sleeps, you might feel tempted to check how you’re doing almost on a minute-by-minute basis. So, striking a balance between tracking your investments and avoiding the development of an obsession is a must.
Fortunately, there are mobile apps that can easily track all the important metrics you need to make decisions. Apps like Blockfolio, Delta and Cryptagon are great at following the market fluctuations and seeing the evolution of your crypto wallet. To get them going, you’ll only need to input the quantity of crypto you own, which currency you’re investing in, the purchase value, and the date of purchase.
Apart from that, you’ll need to establish a routine to check those apps. Since you’ll need to avoid monitoring the market 24/7, you’ll have to predefine which are the best moments to control your investment. You’ll be in charge of that timetable, but don’t fall victim to over checking. A couple of times a day should be more than enough to track your investments.
From huge investors to first-comers, everyone is familiar with the number 1 adage of the investing world: “buy low, sell high.” From articles to movies, a lot of people have used that saying to justify their strategies or explain their success. However, things aren’t that simple in the real world – and they are certainly not simpler with cryptocurrencies.
If you follow that strategy, you might lose some valuable opportunities for buying or selling assets. Once again, the volatility of cryptocurrencies makes it harder for investors to sit on potentially great chances. Given that prices can change very quickly is better if you predefine your buying and selling prices and stick to them.
This doesn’t mean you can’t just break your limits in the face of an unbelievable opportunity. Sometimes, specific market fluctuations can go beyond your expectations to the point where being flexible might be the most reasonable thing to do. However, as a rule of thumb, set your limits for your cryptos beforehand and try to respect them in most cases.
Since all the investments we’re discussing here imply money, it’s only natural for you to secure them. That feeling might increase if you are up-to-date with the latest news about the attacks on cryptocurrencies that led to millionaire thefts. Though we all like to think of cryptocurrencies as a somewhat safe environment, the truth is that crypto exchange is still exposed to security risks.
That’s why it’s important for you to be careful and not stock your crypto assets on exchanges. Instead, try to save them on crypto wallets. These are digital platforms that store private and public keys and interact with different blockchains to let you send and receive currencies. In other words, there’s no exchange of coins or currencies. The only thing that happens is a transaction that tells the rest of the blockchain that the currencies are now assigned to a different wallet address.
Since there are different types of wallets, you’ll need to pick the one that better fits your needs. Online wallets are more accessible but are more prone to hacking. Offline wallets are more secure but less practical. You need to find out which one is the best for you but you definitely need a wallet. Here’s a nice article where you can read all about them.
Finally, here’s a somewhat strange suggestion, right off Silvayn Saurel’s great article on Medium. We already said that the crypto market never sleeps. That means that you can buy or sell currencies at any time you want, during any day of the week. However, Saurel discusses that weekends aren’t the best time to invest.
How so? During weekends, the currency volumes that are traded are significantly lower, which leads to a more volatile market. Under such delicate conditions, predicting prices is more complicated than in any other day, which makes investing during weekends particularly riskier.
Since you can invest in any other time, just avoid weekends. What’s more – Saurel says that it’s best if you take those days off and forget about trading cryptocurrencies. We couldn’t agree more. Doing it will bring the balance we’ve discussed above while also helping you meditate on how your investments are doing.
2020 will surely see an increase in crypto investors – and that’s a good thing! It’ll bring the market further into the spotlight and provide it with some much-needed liquidity and robustness. Of course, for things to work out fine, we need those new investors to bring their A-game.
That’s why we wrote this article in the first place. Newcomers need to understand that investing in cryptocurrencies can be a fantastic opportunity to make money, provided they don’t make certain mistakes. If you’re among them, then we recommend you to keep reading about crypto investments and learn before delving into this fascinating world.