Cryptocurrency Investing Tips You Should Know
Crypto investment has increased considerably over the past years, with an estimated 14% of the American population holding cryptocurrency assets, a 1% increase from 2016. The crypto market has elevated people’s wealth, and at the same time made individuals lose their affluence. For investors who are new to the crypto market, understanding how to rightly invest your cryptocurrency assets is important for increasing your potential returns. Below are some beneficial tips to get you started in cryptocurrency investing.
Develop a Strategy for Crypto Trading
It is no easy feat to differentiate actual cryptocurrency recommendations from frauds. There are lots of scams out there in the crypto world waiting for the slightest chance to take your money. In the initial nine months of 2021, reports of cryptocurrency investment scams increased to 7,118. Action Fraud recorded that these numbers were up 30% in the whole of 2020, with the average loss at £20,500 per victim. Every time you are confronted with information about the cryptocurrency market, take some time to critically evaluate the project or platform.
Diversify Your Cryptocurrency Portfolio
One of the most reliable ways of reducing risks, and in fact, increasing returns is by investing across a variety of crypto assets. In the trading world, this is referred to as Diversification or Asset Allocation. A widely used strategy is to choose several types of cryptocurrency assets to guarantee you profit anytime one of the sectors experiences an increase. Alternatively, it also reduces risk in case one or more sectors experience a dip. While the aim of this strategy is to reduce the loss, it can also lower your ROI. You could always aim to learn more about the range of cryptocurrencies you can invest in.
DeFi Staking
DeFi staking is a method of securing your cryptocurrency assets in unique, autonomous platforms referred to as “dApps” or decentralized applications” to get yearly interest. Decentralized finance (DeFi) is a part of the crypto market that takes basic financial services such as insurance and loans and places them on a blockchain. The major disparity is that the dApps these services operate on are controlled by their group of users using Smart Contracts rather than being controlled by one company. .
Be an Active Investor
Your job does not end once you have invested money in the crypto market. As we said initially, the crypto market is volatile so you have to constantly track the market. You could miss out on a great buying or selling opportunity. To be an active investor means that you have to rebalance your investments regularly. This means that you might have to lower your stake in one cryptocurrency to increase your stake in another. At times, you might also have to sell all your cryptocurrency investments to benefit from the market peak and buy it again when the market falls.
Hedging
This is an investment strategy that’s aimed at lowering potential risks incurred during disadvantageous movements in price in the crypto market. To carry out hedging, you need to place a main trade in a direction you predict the crypto market to head and then place another trade in an opposite direction.
The crypto market is constantly evolving, providing an extensive opportunity to increase your investments. These tips are just a few ways to broaden your funds and increase your chances of a high return on investment (ROI) depending on the level of risk you can tolerate. And do not forget; always invest what you can afford to lose.