You’ve heard of Bitcoin and other cryptocurrencies with “big” promises of profit and want to know what it’s all about and how to get started. Here are 10 tips for you to navigate the complex world of cryptocurrencies and avoid making mistakes that can be avoided with a little preparation regal assets reviews.
The first rule to invest in cryptocurrencies is research, it lies on what the project is about, who are the developers of the project, what solution it has to a certain problem, the opinions in the communities of reddit, Steemit, Twitter and other networks to find information. Seek good and bad opinions of each project to have more information with which you can act.
Research is very important since the world of cryptocurrencies is not fully regulated, there is no financial entity that can answer for scams, misuse of currencies and thefts.
Likewise, it is estimated that more than 90% of the cryptocurrencies that currently exist in the market probably do not exist within 5 years, therefore it is very important to know where the money you want to invest will go and the procedure that this entails.
2- Make adequate storage.
Many problems incur in the bad storage of cryptocurrencies since they are stored in exchange houses that serve to buy and sell cryptocurrencies, but for long-term storage media it is risky. The risk is because the exchange is not responsible for returning the money to its clients, if it is closed, hacked or banned, there is no entity that can support all clients.
The safest way to store coins is in your software Wallet, a hardware wallet or a paper wallet, since it is far from being hacked there.
3- Choose an investment strategy.
There is a big difference between being an investor and trading, they have different approaches with the same objective that is to increase net worth or capital.
The investor buys at a low price and waiting for the value to increase in the long term, this type of strategy is known in the world of cryptocurrencies as Hodl, which means for many in the community according to its acronym in English “Hold on to dear life”.
This type of Hodl strategy has a medium to long term to realize your profits, this requires patience and correct analysis of the currency through the previous investigation that you carry out.
The trading strategy is when buying and selling in the short term with a higher percentage of profits but in less time. It is a very difficult discipline that needs quite a bit of practice due to short term market volatility and is not easy to learn.
The reality is that most traders lose money in the market and the few that win do so because they have had a lot of experience and are constantly learning more about the market every day. When you start on the learning path for a trader, you must be willing to lose money at the beginning just to gain experience and be aware that it is not easy.
Everyone who starts investing in cryptocurrencies must first choose whether their investment plans are short or long term. If your plans are short term and the purpose is to make money “fast and easy”, cryptocurrencies may not be a suitable investment for these people.
4- Diversify the portfolio.
Portfolio diversification is a very important part since a correct distribution of investment in cryptocurrencies can minimize risk.
A good diversification is to correctly distribute the money in several cryptocurrencies that you have decided to invest and not have all the capital in a single currency.
Altcoins (Altocoin = all Bitcoin differentiated cryptocurrency) can become more risky than bitcoin, therefore dividing the portfolio into 70% bitcoin and 30% altcoins (these percentages vary depending on the risk the person wants to take) this will reduce the risk of having a loss of investment.
5- Choose the strongest cryptocurrencies
The best cryptocurrencies are characterized by their acceptability, security and functionality.
Another approach in which the selection of a cryptocurrency improves, is to know if there is support from the development community and to follow up on the work that they carry out.
Decentralization is the essence of blockchain and some currencies are not fully decentralized since a small group of people can have more than 51% of the shares and generate the power to control the price of a currency.
The price of a coin does not determine whether it is solid or not, many people think that investing in a low-priced coin is the best option to have a higher return on investment or high-priced coins have no more room to go up.
But in order to find the right altcoin, you should not only see the price, it is also important to know the existence of the currency supply (supply), how many coins are in circulation, if you copy to another existing currency without adding value, if it solves a problem new and not the ones that other currencies want to solve and if the project is currently being carried out. These features will also help determine the best option for a coin.
6. Keep an investment control
Keeping track of cryptocurrency investments is very important to regularly know the status of your investments.
Account for the purchase price at which the currencies will be acquired and the commission that this purchase entails to take better control of the investment returns of each currency and thus help in better decision-making.
Also keep track of sales and record if there was a loss or gain according to the purchase made. There are tools like blockfolio and cointrackinginfo that help in this. You can also make an excel sheet with formulas to lower market prices from the internet.
7- Correctly manage money.
Money management in daily life is important and even more so when you have financial commitments and responsibilities, therefore, when investing in cryptocurrencies, you must make money that you are willing to lose, that is, capital that you will exceed after covering your expenses and responsibilities.
It seems obvious but it should be repeated that you should not borrow money to invest in this market, since any investment carries a risk of being lost and can affect mentally and emotionally and emotions are the worst advisor to an investor.
8- Do not follow speculations blindly.
Speculations generate volatility phenomena of a currency like the pump and dump means that certain people inflate the price of a stock or currency, promote the currency, talk about the team, say it is the second coming of the BTC, but in reality this person it is part of the pump and dump process.
9- Avoid ICOs if you don’t know what you are doing.
An ICO (Initial coin Offering) is the collection of money that an altcoin makes before launching into the market. In some cases the projects are not carried out and simply keep the proceeds offering a good image, but without a specific project.
10- Have a good psychology to adversities.
As mentioned above, volatility in the market is constant, therefore there will be times when the price is very low, which arouses the euphoria to buy, this is called FOMO. (Acronym in English “Fear of Missing Out” afraid of missing the opportunity).
There is the opposite side FUD (Fear, Uncertainty and Doubt) which means Fear, Uncertainty and Doubt (often spread on social networks or the media). The FUD can make the price of a currency drop regardless of the fundamentals or charts, but is based on the reaction of the markets to bad news that spreads on social networks.
These phenomena of psychology must be learned to control and avoid making decisions when you are in these feelings. The best investors buy when the market is in panic and sell when the market is euphoric because they don’t let the FUD and FOMO modify their investment plan.