Talking about Cryptos may make people around you feel like you’ve lost your head. Questions like this are quite frequent — is this not a bubble? Can this be ethically lawful to invest? This is gambling. However, this piece is specially put together for newbies, especially millennials who are marveled by the magic of the crypto world.
Delve extensively before investing
The first step in crypto consciousness is understanding the underlying technology – blockchain. Forget the tech jargon for now. No one needs to convince you of how revolutionary blockchain technology is. A good starting point is reading articles, checking online forums and vlogs discussing cryptos. You’d soon find out why governments and corporations are exploring this nascent technology and how they’re looking to integrate it into their systems, or why banks are fearful of Blockchain and cryptocurrencies as a threat to their existence and looking to clamp down its growth. This outlook will help broaden your mind to learning and seeing the possibilities of the potential of blockchain technology.
Use and Exchange
Use an exchange, not a broker. You’ll save money on fees. For example, buy and sell with an exchange like blockvila or its likes.
Learn about position sizing and risk management.
To the above point, one generally takes a much larger risk with bigger bets. Learn how to make the right size buys and sells to avoid losing too much on a bad play.
Invest only what you are willing to lose
only invest what you’re willing to part ways with. This is because the market is exceptionally volatile, one which is fueled by hype and market sentiments rather than fundamental elements. This makes the crypto markets intensely risky; that’s why you have the potential to make loads of money or lose everything instantly. Always exercise caution and please, do not mortgage your house or take out a loan to invest in cryptocurrencies; you’re only signing your death warrant.
Focus on the long run
Cryptocurrency is not a “get rich quick scheme”. Do not have the sole mentality of pursuing short-term gains, especially if you do not have the necessary trading or technical skills. Let’s face it, many in the crypto markets have no idea what they’re investing in and are in this only for the short-term rewards. This is a recipe for disaster. It is imperative that every investment decision is based on thorough due diligence and patience. Do not be the guy who had 1700 BTC when it was valued at $0.06. He sold it for $0.30 and was then lamenting when it reached $8.00. This was back in 2011. Imagine if he had hodled today, it would be worth tens of millions today!
Aim to buy low, sell high; try not to buy high, sell low.
Look at the price trend, if we are at the highest point it has been in the past 24 hours (days, weeks, etc), that is inherently riskier than buying at a short-term low. It can make sense to buy as the price starts to break out (to “buy into strength”), but buying after a breakout at a new high while filled with excitement is a little “irrationally exuberant.” This is to say, aim to “buy the dips” and often “the best time to buy is when there’s blood in the streets… even if it is your own.” Conversely, the worst time to buy is often (but not always) right after the price has shot up and everyone is manic. If you do buy high, and it ends up dropping shortly after, consider HODLing (to “HODL” is to Hold On for Dear Life as the price goes down). Buying the dips and holding can be dangerous in a bear market, and it can put pressure on you to sell low if you overextend, but it is still often better than FOMO buying the top. Sometimes it can be wise to sell for a loss or to buy when the price is at a local high, but knowing when this is the case requires a rather high skill level. Thus, although rules sometimes are best broken, start by aiming to buy low and sell high. Two last points A. Knowing when to take a loss is hard, buying the dips and holding is easy. B. The dips WILL happen, you must be patient and ward off FOMO! C. If you aren’t willing to see 90%+ losses, then call a point where you will take a loss and stick to the game plan.