For those who felt like they missed the boat to invest in cryptocurrencies when prices shot up in late 2017, don’t worry. Now that the market has calmed down, there are numerous new opportunities to get into an exciting market.
We won’t recommend any particular investments, but we will give you the information necessary to set up a responsible strategy to invest in cryptocurrencies in a way that protects you from merely going along with the crowd or following a bot’s “recommendation” on Twitter because you don’t know any better.
How to invest in cryptocurrencies?
Before we cover how to build your cryptocurrency investment strategy, let’s make sure you know the basics – where to buy them and how to store them.
The first thing you’ll want to do is set up an account on an exchange that allows you to buy cryptocurrencies with fiat currency. If you’re reading this piece, you’ve probably heard of Coinbase. It’s a reliable exchange, trusted by millions around the globe. There you can buy Bitcoin, Bitcoin Cash, Litecoin, and Ethereum only. If you’re not interested in owning any cryptos outside of these four, you’re covered. Once your account is set up, you’re ready to buy your first Bitcoin. However, if you want to diversify your portfolio to include other cryptos, you’ll want to set up an account on an exchange where you can trade Bitcoin or Ethereum for other cryptos.
Binance has one of the most diversified platforms where you’ll be able to find nearly any cryptocurrency available. If the crypto you’re after isn’t there, look it up on coinmarketcap.com and click on ‘Markets’ to find where it’s listed.
Depending on the amount you’re planning to invest, you might need to buy a cold storage wallet like Ledger or Trezor. These are the safest storage options to secure your crypto funds as you keep them offline instead of leaving your money on an exchange where it’s vulnerable to hacks.
Now that we’ve covered the basics, let’s get to the fun stuff.
Define a system (and stick to it)
You should decide how much money you’re willing to invest by working out the amount you’d be comfortable losing, since cryptocurrencies are a highly speculative investment. That may seem like an odd way of getting started, but by making this simple assumption, you can protect yourself from being irrational at times when the market isn’t going your way.
Once you’ve picked an amount which, if lost, wouldn’t put you or your family’s financial success at risk, you’ll know the initial amount to invest in your crypto portfolio. When you invest in a crypto, remember to establish your profit lock-in price to ensure you don’t miss out on any gains (for example, if it doubles in value, sell half and lock in those gains). You must also set up stop losses to guarantee you only lose what you’re prepared to lose.
Do your own research
At this point, you’ll have to decide how to divide your portfolio, and this depends entirely on your philosophy. If you want to play it safe, cryptos like Bitcoin or Ethereum will give your portfolio a solid basis made up of credible, successful projects which are as safe as it gets in the crypto market.
If you’re comfortable taking on more risk, allow a small allocation of funds to go towards smaller cryptos in which you recognise there could be a massive upside potential.
Once you’ve locked in on an exciting crypto, spend a considerable amount of time doing your research, so you can be comfortable with your decision to invest in that project, even when the market is in turmoil. Check that crypto’s project, strategy, team, milestones, and progress to decide whether that cryptocurrency is worth your money.
If you believe in them, you’ll be less vulnerable to panics because you’ll understand there’s more to their long-term success than the highs and lows of everyday trading.
A final thought for potential investors
As we mentioned at the start of this article, the recent slowdown in cryptocurrency prices is a golden opportunity which crypto-traders and investors alike must seize in order to reap the long-term benefits of applying a successful strategy.
If you stay away from shillers and unwarranted hypes, do your own research, define (and stick to) a methodology, and diversify your investments, you’ll have a strategy which will ensure you don’t behave irrationally.
By obeying the principles that you’ve set up, you will protect yourself from going along with the market at times of crisis while capitalising on its irrationality to lock in profits when everyone else is clueless.
Happy trading, enjoy your investments, and reap the fruits of your success. For more information on cryptocurrencies, check out the rest of our guides here.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.