Perhaps you’re thinking about “buying the dip” and investing in crypto or making an even bigger position. Whichever option you choose, How do you increase the value of your crypto investment? How can you reduce risks, increase diversification and shield your investment from theft and fraudulent activities?
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Embrace risk tolerance instead of FOMO
One of the biggest errors that novice investors make in their attempts to make the most of cryptocurrency investments is to invest with excessive capital. They aren’t looking to “miss out” on the next bull run; therefore, they put thousands or tens of thousands into their first trade.
However, FOMO isn’t a good investment strategy. Anyone who purchased BTC in the fourth quarter of 2021 has learned that lesson most painfully.
An alternative is to ignore cryptocurrency for a second and assess the risk you are willing to take.
Depending on your risk tolerance, you can allocate a certain amount of your portfolio- mentally and financially- to the “ultra high-risk/speculative” investment category where crypto lives. The range is usually between 1 and 10 percent and an average of five percent.
Which Cryptos Should You Buy?
Being a completely speculation-based investment vehicle, cryptocurrency doesn’t come with the typical meat for investors enthusiasts to chew. They do not come with the P/E ratio, earnings reports, waiting for FDA approvals, or C-Suite scandals. There’s even no specific measurement for floating. However, the site does have white documents.
Even in the absence of a CS background or experience, a crypto-dev team’s whitepaper can expose crucial market-relevant information such as:
- The problem is being addressed
- Core design principles
- Leadership experience
- The landscape of competition
- The challenges facing massive adoption
Some white papers seem to read more like pitch notes than blueprints.
For example, imagine it’s 2008: global markets are crashing, and Satoshi Nakamoto releases a white paper known as “Bitcoin.” Even in its early stages, Bitcoin seems like it can resolve a lot of problems.
Similar to the Ethereum whitepaper might be lengthy and technical, but the message you take away is “Bitcoin with better storage,” which could be enough to cause you to spend $100 on the ICO.
Don’t Be Afraid to Sell High.
While HODLing crypto for the long term is a good investment strategy, don’t be afraid to sell your shares at a premium if you’re prepared to leave. Maximizing your investment in crypto does not mean you have to jump out just in the middle of the market before it explodes.
Additionally, your cryptocurrency should not make up more than 5 percent of your portfolio of investments. This means you’re not relying on crypto profits to help you retire. It’s speculation, not even enjoyable.
There’s nothing wrong with taking a break from making money and trying a different casino. Make sure to give the I the RS a cut of the profits.
Hedge Your Risk Through Dollar-Cost Averaging (DCA)
We’ve now covered the amount of crypto you should buy. When should you purchase it? What is the best frequency? With all the volatility in the cryptocurrency market, how could you predict when it will be right?
Expert crypto investors employ dollar-cost average (DCA) to parse trades and hedge risk. For those who aren’t aware, DCA is simply investing the same amount of money regularly, whatever the assets value in the market.
Let’s say, for instance, you’re planning to buy $6,000 worth of Ethereum. This is a significant amount, and if you do it incorrectly, you’ll be able to lose the majority of it.
Instead, you can divide the lump sum into 12 and then purchase $500 worth of Ethereum on the 1st day of each month. This means that you’ll buy at different prices all through the year. In the end, the cost you will pay is Ethereum’s average market value over the year.
Consider Staking for a Trickle of Interest
Some platforms like KuCoin, offer to stake for a selection of cryptocurrencies, similar to an instant crypto CD. You can lock your crypto for up to 30 days, and you could earn approximately 2 to 9 percent interest on it, based on the currency.
Cryptocurrencies such as Ethereum Tezos, Ethereum, and Cardano provide staking options, and the rewards are paid through the crypto you’re investing in.
It’s not like you should purchase a cryptocurrency solely because it allows stakes -it’s more of an “if you already have some, might as well stake it” sort of thing. However, it can bring in some curiosity if you decide to take a substantial stake in a stake-able cryptocurrency.
Protect Your Investment
Naturally, one of the primary guidelines to maximize your cryptocurrency investment is to ensure that your investment doesn’t degrade within a short time.
The cryptocurrency market isn’t controlled or secured like the NYSE; consequently, criminal activity is rampant. An unprecedented 14 billion dollars worth of cryptocurrency will be stolen by 2021 only by scams, hacks, and phishing. That is a 51% increase from the 2020 levels.
Fortunately, efficient DIY security measures are available in the crypto-world -and one of them involves a safe. To protect against theft and hacking, most long-term HODLers keep their keys in a “cold wallet” like a hard drive, USB stick, or even a specially-designed product such as the Ledger.
This means you are no longer at risk that your keys could be stolen from a database online. This problem has occurred to major exchanges such as KuCoin crypto exchange and popular hot wallets that are trusted, such as Metamask.