The cryptocurrency market is a promising direction in the financial world. Large institutional investors are investing millions of dollars i...
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 a loss of capital but also discourage the investor from working with a new class of assets. In this case, representatives of the crypto industry have prepared a series of tips that will help newbies save capital and increase it.
Invest in Bitcoin
This advice was given by the head of the fintech company Exantech Denis Voskvitsov. He explained that this is the "blue chip" of the cryptocurrency industry, 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 is looking at the digital coin with much more interest than 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, the expert is sure.
Buy Bitcoin regularly and invest long-term
Voskvitsov suggested investing a small amount in cryptocurrency on a permanent basis, for example, 5-10% of the 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 compared to 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, ”Voskvitsov explained.
From his point of view, cryptocurrency is one of the most striking financial events of recent times, and it is definitely worth investing part of your portfolio in bitcoin. If at least partially the forecast of Citibank's top manager about the growth of the BTC price above $ 300 thousand comes true, such an investment will be "more than profitable."
Invest in the most liquid instruments
Voskvitsov did not recommend that beginners invest in little-known 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, the expert believes. He drew attention to the fact that now bitcoin is trading above $ 20,000, and the strongest altcoins are several times cheaper than at the peak of 2017.
Collect a portfolio of cryptocurrencies
This recommendation was proposed by the CEO of the EXMO exchange Sergey Zhdanov. In his opinion, 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.
Bitcoin, then altcoins
Zhdanov continued that 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.
Rebalancing and no panic
Having collected a portfolio of cryptocurrencies, it is better to react as little as possible to information noise, Zhdanov emphasized. 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.
Avoid obscure projects
Zhdanov advised against investing in unpopular coins, even if they seem promising. It is important to carefully and thoroughly approach the choice of cryptocurrencies and not forget that the higher the profit, the higher the risk.
Watch out for big players
If you nevertheless decide to invest in new altcoins, then it is more efficient to choose well-known projects in which large players are already interested, Zhdanov recommended. For example, you can check where stock exchanges or companies such as Pantera Capital invest.
Don't trade mindlessly
Novice users, seeing the high volatility of the market, often decide that they can make money on it. Zhdanov insisted that it is better for beginners to make deals 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.
Be as careful as possible with leverage
Margin leverage allows you to take borrowed 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. From Zhdanov's point of view, the size of the leverage should be consistent with trading experience, so beginners are strongly advised to use the minimum leverage.
Voskvitsov, on the contrary, advised newcomers 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.
Keep assets in dedicated hardware wallets
These are USB stick-like devices that are not connected to the Internet. Voskvitsov recommended storing digital coins in this way, or in local wallets on a computer and in an application on a 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 the confidence that they can be quickly withdrawn. 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.
Study the market
The novice investor needs to dive into the specifics of cryptocurrencies, Ross-Johnson continued. He advised us to study the dynamics of the behavior of various assets, and try to figure out what determines the growth and decline of their prices. This will help you learn to predict the development of the market in general and for individual coins in particular.
Don't play roulette
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.
