Understand Cryptocurrency Investment in 5 Minutes
Cryptocurrencies are regarded as some of the riskiest investments out there, and as expected, one of the more lucrative ones thanks to this. Volatility is one of the more discouraging traits of cryptocurrencies.
It’s not uncommon for the price of a coin, for example, Ethereum, to swing up a hundred dollars and then go down in the same day.
That means that the cryptocurrency you own can gain a lot of value or lose it overnight. Even Bitcoin dropped from $9,000 to $3,500.
Are You a Crypto Trader or a Crypto Investor?
The first step to make sure you’re limiting your risks is deciding if you’re a trader or an investor.
As a trader, you get in and get out no matter what kind of cryptocurrency you’re getting into.
As an investor, you find products that you believe might be successful and invest your capital into them.
If done correctly, you’ll obtain profits from your invested capital and be able to reinvest them into the same or more projects, rinse and repeat.
Do not invest in projects that you don’t know about, or can’t relate to. When investing, the successful investor will always research all the important information of a project. When you know about the industry or it is a project that you’d use, it’s easier to understand the possibilities of the project being successful, thus ensuring your return on investment.
No one knows where the market will go, and it’s hard to predict it without doing research on major cryptocurrency news outposts, such as cryptoslam.io.
The most important thing for investing in cryptocurrency is discipline.
This isn’t a get-rich-quick scheme, as some notorious crypto investors might have made it seem.
If you blindly invest in projects, there’s a high chance you’ll lose money. Find projects you have researched into and understand their potential. Remember to take profits to protect your downside, as any project could crash at any time.
Cryptocurrency Investment Strategies
There are three different strategies in the world of crypto. First, there’s high risk, there’s medium risk and there’s low risk. As appealing as low risk might sound, all of these strategies include a degree of risk. There’s a chance of you losing money in all of them.
An example of a low-risk strategy would be taking a little bit of your capital and investing it into a safe and stable coin, such as USDC, which is backed by a US Bank.
Stable coins are spent on platforms like Blockfi, and their profits can be taken into DeFi for a higher risk. Of course, investors should be aware that these platforms can fall at any moment and they could lose money in the process.
A medium-risk strategy would be investing in the so-called blue-chip coins. These are Bitcoin, Ethereum, Chainlink. These platforms drop 40–50% in a couple of months, but they are still relatively stable because they’ve been around for years.
Finally, we have high-risk investments, such as investing in small-cap gems, cryptocurrencies that are in the early stages of development and can allow investors to achieve incredibly high returns. You have to be prepared to lose anything in a short amount of time for these investments.
It’s entirely possible to earn profits from a high-risk strategy and invest them into a low-risk strategy, and vice-versa.
Do Your Own Research in Crypto (DYOR)
Investors should attempt to try all of these out and find out which one of these strategies they’re most comfortable with. Alternatively, they can even try a combination of many of them at the same time. The decision is up to you. Start developing your investment style by choosing one of these strategies.
