Don’t Press Your Luck. 13 Tips For Beginner Bitcoin Investors
Acquaintance with cryptocurrency can easily end in loss of capital. However, this can be avoided if you follow simple rules.
The cryptocurrency market is a promising direction in the financial world. Large institutional investors are investing millions of dollars in digital assets. Perhaps their demand for bitcoin will continue to grow, at least the stock market is preparing for this. Earlier, the largest bank in Singapore announced the launch of an exchange for trading digital assets, and the provider of leading US stock indices, S&P Dow Jones Indices, announced the development of an index for cryptocurrencies.
Therefore, it is important to get acquainted with the cryptocurrency market now, before their price “flew to the moon,” as predicted by the economist and author of the bestselling Rich Dad Poor Dad Robert Kiyosaki. But at the initial stage, a lot of mistakes can be made, which can lead not only to loss of capital, but also discourage the investor from working with a new class of assets. In this case, representatives of the cryptoindustry have prepared a series of tips that will help newbies save capital and increase it.
1. Invest in Bitcoin
This is the main feature of the cryptocurrency sphere, which determines the mood of the entire market. Moreover, BTC is considered the new gold, as the “old” money of baby boomers is passed on to the younger generation – millennials. The latter are looking with much more interest at the digital coin, and not at the precious metal. Perhaps this fact is behind the interest of institutional investors in the asset, and if everything is so, then the interest will be long and stable.
2. Buy Bitcoin regularly and invest long term
Invest a small amount in cryptocurrency on a permanent basis, for example, 5-10% of your salary. And it is more promising for beginners to hold assets with long-term goals than to try to speculate. Strong price fluctuations can lead to panic selling of coins during falls and result in losses.
“This market is significantly less in terms of capitalization than the stock market, which means it is much more volatile. Often, investors lose their nerves, and they sell the asset at the lows and buy at the highs. Stop looking at quotes on a daily basis, follow the industry news. It saves you nerves and broadens your horizons. “
From his point of view, cryptocurrency is one of the most striking financial events of recent times, and investing part of your portfolio in bitcoin is definitely worth it. If the forecast of a rise in the price of BTC above $ 300 thousand at least partially comes true, such an investment will be “more than profitable.”
3. Invest in the most liquid instruments
Newbies should not invest in obscure altcoins. Yes, they can show strong growth, but at the same time, they are less resistant to falls. Therefore, if you invest in such coins, it is safer to do it through the purchase of indices or funds. Now Bitcoin is trading near the historical maximum of $ 20 thousand, and the most powerful altcoins are several times cheaper than at the peak of 2017.
4. Collect a portfolio of cryptocurrencies
If a novice investor is ready to patiently expect results from their investments in the context of a year or a couple of years, then buying several coins is the most suitable strategy.
5. Bitcoin, then altcoins
The share of BTC in the portfolio should preferably be the largest. In addition to the main digital coin, you can buy popular altcoins that are at the top of the cryptocurrency rating by capitalization.
6. Rebalancing and no panic
Having collected a portfolio of cryptocurrencies, it is best to react as little as possible to information noise. Also, the best solution would be to periodically rebalance the portfolio. For example, sell assets that have risen in price and buy those that have fallen in price by this amount.
7. Avoid obscure projects
Don’t invest in unpopular coins, even if they seem promising. It is important to be very careful and thorough in the choice of cryptocurrencies and not to forget that the higher the profit, the higher the risk.
8. Watch out for big players
If you do decide to invest in new altcoins, then it is more efficient to choose well-known projects that major players have already become interested in. For example, you can check where stock exchanges or companies such as Pantera Capital invest.
9. Don’t trade mindlessly
Novice users, seeing the high volatility of the market, often decide that they can make money on it. It is better for beginners to make trades only if they clearly understand the ratio of possible profit to loss. If you do not know at what price you will sell an asset if its price falls, give up trading.
10. Be as careful as possible with leverage
Margin leverage allows you to borrow capital from the exchange and use it for trading. On the one hand, this increases the potential profit. On the other hand, the risks are also growing. The leverage should be appropriate for trading experience, so beginners are strongly advised to use minimum leverage.
Some experts, on the contrary, advise beginners not to use borrowed funds at all. Leverage is a loan and is generally not free. Therefore, there is a risk of paying large commissions if you keep the position open for a long period of time. In addition, the cryptocurrency market is extremely volatile. In such conditions, trading with leverage is the risk of running out of money very quickly, the expert emphasized.
11. Keep assets in dedicated hardware wallets
These are USB stick-like devices that are not connected to the Internet. We recommend storing digital coins in this way, or in local wallets on your computer and in the application on your smartphone. It is safer than using exchanges. They are at risk of being robbed or blocked by financial regulators.
Michael Ross-Johnson, CEO of p2p cryptocurrency platform Chatex, added that assets are best kept where there is confidence in their quick withdrawal. There are two reasons for this. First, the state is constantly paying attention to the crypto market, new laws are being created, and the requirements for regulating the industry are tightening. Secondly, if the price of a cryptocurrency starts to decline sharply, it is important to be able to quickly sell assets.
12. Study the market
The novice investor needs to dive into the specifics of cryptocurrencies, Ross-Johnson continued. He advised to study the dynamics of the behavior of various assets, try to figure out what determines the growth and decline of their prices. This will help you learn how to predict the development of the market in general and for individual coins in particular.
13. Don’t press your luck
Ross-Johnson is convinced that it is worth trying to trade. But this is best done only if the investor really understands what he is doing. Otherwise, such trading will be more like Russian roulette with the possibility of large losses.