Crypto has taken the world by storm. Apart from facilitating, safe, secure, and low-priced transactions, cryptocurrencies are also a lucrative and exciting asset for investors today. In our post on the 5 Benefits of Investing in Cryptocurrency, we highlighted how the notion of store value in crypto is slowly returning since its exchange rate is unconstrained by politics and market fluctuations, unlike the forex market or stock market. For this reason, taking a deep dive into crypto can be a great way to diversify your investments and gain huge returns.
In this post, we outline four ways that will help you find success as a crypto trader.
Diversifying your crypto portfolio is key
If you’re already invested in other assets such as stocks, ETFs, and mutual funds, venturing into crypto can help you further diversify your portfolio. However, it is essential that you don’t put all your eggs in one basket and also explore other cryptocurrencies. While you may feel safer investing in well known cryptos such as Bitcoin and Ethereum, you may miss out on potentially life-changing coins. For example, Solana was listed as one of the top cryptos to invest in due to its “low fees, maturing ecosystem and promising future in DeFi”. Before investing in new, but high-potential, cryptocurrencies, be sure to do intensive research to avoid wasting your money.
Learn the importance of hot and cold wallets
Don’t make the mistake of storing all your digital assets on a crypto exchange. In order to protect your crypto investments, you should have an online “hot” wallet and an offline “cold” wallet. An article on AskMoney outlines that cryptocurrency wallets are online programs or physical drives that store the codes you need to access your crypto assets. Keep all the money that you’re willing to trade in an easily accessible in a hot wallet, and store the rest and your profits in a more secure and stable cold wallet. Also be aware that hot wallets are much more open to cyber threats due to being constantly connected to the internet. So it may be best to keep the majority of your cryptocurrency in a cold wallet, and then transfer the required funds to a hot wallet when needed.
Don’t fall for bad advice
Beginner crypto investors learn soon enough that there’s more to crypto than the hype that surrounds it. Today, there are a lot of individuals and communities that promise high crypto investment returns by following their advice. Without proper discernment, heedlessly following the advice of certain individuals can cause you to lose your crypto investments. A post on business news website Business Insider highlights how it is important to study the crypto market first and have a foolproof trading strategy that’s backed by research. Doing so allows you to create well-laid plans for when to enter and exit positions, as well as help you figure out if you’re getting good advice.
Be ready to encounter extreme volatility
NDTV states that the volatility of the crypto market is due to its newness. Unlike other assets such as stocks or forex, cryptocurrencies are still at a very nascent stage. Accepting that the crypto market is highly volatile is the first step to masterfully navigating it. Don’t expect your crypto investments to instantly achieve stability. Instead, expect the prices to make big up and down swings as time goes on. Doing so allows you to restrict yourself and only invest money that you can afford to lose. This will also allow you to be ready for any quick price changes to make a profit.
If you’re a beginner crypto investor who wants to find success down the road, be sure to heed the advice we’ve discussed above. For more crypto news and insights, have a look at our features here on Cryptocurrency Guide.