This guide is for you if you haven’t tried dipping your toe into the crypto sphere, but you are seriously thinking about it. There are over 1600 cryptocurrencies today, but Bitcoin is the most popular one so much so that most people believe Cryptocurrency is synonymous with Bitcoin. So is cryptocurrency money or an investment: well, you could say it’s a bit of everything.
The following tips will help you enjoy the journey that is buying cryptocurrencies. For the purpose of this guide, we shall use Bitcoin as an example.
You don’t have to buy cryptocurrencies in whole numbers. If, for instance, you wanted to buy an entire Bitcoin today, it will cost you over $11,000, which is a lot of money. Just like Bitcoin, most cryptocurrencies are divisible. Think about investing in terms of fractions. Most people will begin by investing $100 into Bitcoin. In cryptocurrencies, “don’t invest more money than you can afford to lose.”
Open a Cryptocurrency Exchange Account
There are different ways to buy cryptocurrencies; you can buy them offline or online. In this guide, we shall consider how to buy Cryptocurrency from a crypto exchange. Like you must sign up at a stock company for them to buy stocks, you must open an account with a cryptocurrency exchange to be able to buy cryptos.
When choosing a cryptocurrency exchange, make sure that you compare cryptocurrency exchanges while considering the following essential factors:
- Legality: Make sure that the exchange operates in your country.
- Trading fees: Different exchanges charge different amounts of money as fees.
- Safety and reputation: Find out how long the exchange has been around and whether they have excellent customer support.
- Coins: Find out if the exchange supports the currencies you intend to buy
Form a Crypto Trading Strategy
The next step is to formulate a pre-investment trading strategy. Some of the critical decisions you will make include:
Choose a blend of leading, medium-sized, and small cryptos. This addresses liquidity issues for your overall portfolio.
If you have enough time to trade, it makes sense to consider a short, medium, and long-term trading strategy. Consider having 20% of the smaller, more volatile coins in your pool as they increase potential intraday earnings. Use the larger coins for your long-term strategy, and for your medium-term plan, consider blending anything beyond intraday and a month. Use risk management tools and indicators like stop loss and trade profit to protect you from downsides.
Use an 80/20 rule blend to cover large-cap to small-cap when considering market volatility regarding the rise and fall of smaller coins. This facilitates making sizable profits from sudden surges in the small to medium cap cryptocurrencies, while you hold on to the more stable currencies.
The rule of the thumb in cryptocurrency investment is “only invest what you are willing to lose.” Maintain up to 95% of your investment in a well-diversified portfolio covering different asset classes and geographical regions. This will position you to mitigate risks and take advantage of emerging opportunities.