8 tips to master your crypto investment game

Cryptocurrencies have emerged as a new investment class with the increased adoption of the underlying technology – blockchain. Blockchain is changing the way businesses operate globally. All the major industries are adopting technology to make their operations more efficient. Decentralisation is at the core of blockchain and since the technology powers cryptocurrency, investors have finally found an asset that aims to put them at the control of their money. 

Many young entrepreneurs, including women, look at crypto as a means to achieve financial freedom. The cryptocurrency market is extremely volatile. The total crypto market reached $3 trillion in 2021. However, it now stands at nearly $1.98 trillion.

This significant change in the net market cap just a few months apart reflects the extreme volatility of the crypto market. An investor needs to be mindful of the high-risk, high-reward game before putting their money in cryptocurrency.

Cryptocurrencies have emerged as an alternative to traditional investment over the past few years, and the number of people investing in the market is increasing at a staggering rate. As of 2021, more than 300 million people have invested in cryptocurrencies globally. Over 18,000 businesses across the world accept cryptocurrency payments.

The rising interest of investors in cryptocurrencies is fuelled by the rising adoption of blockchain technology across industries. According to a study, 58 percent of the total crypto investors are below the age of 34. 

It is important to note that using cryptocurrencies as a payment method and investing in different cryptocurrencies are two different things.

We will focus on the latter, as investing in crypto allows you to diversify your portfolio across different coins. Before investing in the crypto market, you need to be well versed with different factors that affect the market. 

Important tips for beginners

Educate yourself

You must understand what you are getting into to make a profit from investing in crypto. Bitcoin, the biggest cryptocurrency by market capitalisation, is powered by blockchain technology. Blockchain is the underlying technology here that has real-world utilities.

A study suggests that as many as 58 big industries could adopt blockchain in the future to transform their operations. Study about the underlying technologies having real-world use-cases to find profitable investments. 

Prepare for extreme volatility

One factor that sets the crypto market apart from all the other markets is extreme volatility. Crypto is a ‘high-risk, high-reward market because of the frequent fluctuations. The value of Bitcoin dropped nearly 30 percent in a day in May 2021. Expect exponential pumps and dumps in the prices of various cryptocurrencies. Matic (earlier Polygon) provided 4,300 percent returns to investors last year. Some other cryptocurrencies surged as much as 50,000 percent in just one year.

As an investor, you must be ready for both pumps and dumps. Avoid getting perplexed with the fluctuations and focus on cryptos with strong fundamentals.

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Buy the dip

Buying the dip is the key to maximising your profits. Avoid investing in cryptos that are already pumping. Consider every dip as an opportunity to grow your investment. But how does one spot the dips? Study price action and price history of the past six months to one year and mark average entry points. Avoid investing all your money at once.

Put in some funds at one entry point and focus on DCA (dollar-cost averaging) as the price goes down further. DCA is a simple investment strategy where an investor divides the total amount to be invested across multiple entry points.

Focus on the utility of tokens and stick to the ones with real-world adoption. For example, the Ukrainian government has picked Stellar ($XLM) to help them build their national digital currency.

Select a legitimate exchange

A crypto exchange is a platform where you can buy and sell cryptocurrencies. The market is flooded with crypto exchanges claiming to provide the best services. So how do you verify the legitimacy of an exchange? Visit their website, see their team structure and verify the details from the internet. Also, check the trading volume on the exchange.

Look at the number of years they have been operating for. Also, verify if the exchange you are using is regulated in your country. Some of the most trustworthy and widely used exchanges are Binance (28.5M+ users), FTX (10B+ daily trading volume), Huobi (operating in 170+ countries), Kucoin (10M+ users, 207+ countries) and WazirX (10M+ users, India-based, backed by Binance). 

Security

Once you sign up on a crypto exchange, you are in charge of securing your investment. Secure your account by enabling 2FA. Never share your BTC, private keys or verification code with anyone. ‘Not your keys not your bitcoin’. Avoid signing in to your account from a public network e.g. office or hotels.

Never open your account while connected to public WiFi. Avoid keeping all your funds on one exchange. Maintain multiple accounts and split your funds. Change your passwords regularly. 

Stick to blue chips

There are more than 10,000 cryptocurrencies in existence but, only a few have real-world use cases and a significant trading volume. As a beginner, you must focus on token utility, real-world adoption, significant trading volume and steady growth over the years.

Focus on technology and innovation instead of hype. The crypto world is constantly evolving with the emergence of trends like DeFi, Metaverse, NFTs, and Web3. Study the fundamentals of these trends and look at the adoption rate to find tokens with real-world utilities. Bitcoin, Ethereum, Solana, BNB, Cardano and Chainlink are blue-chip cryptocurrencies. 

Avoid FOMO

FOMO stands for fear of missing out. The crypto market is full of opportunities, and sudden pumps are a part of the game. Focus on some good investment opportunities instead of running behind every pumping token. Keep your distance from those predicting the future of tokens.

Always focus on the highs and lows of the market cycle. Define your investment goals and set your targets accordingly. The crypto market cap grew by 187.5 percent in 2021 alone, and you can easily grow your investment by focusing on tokens with real-world utility. 

Beware of scammers

Scammers are always on their feet to rob investors of their portfolios. Beware of fake airdrops, pump and dump schemes and signals from social media handles. Scammers also use imposter websites to loot investors.

Double-check the URL of the exchange before entering your details. Always download trading apps from authentic sources like Google Play Store and Apple App Store. It’s good to connect with other crypto enthusiasts and influencers on social media but never make investments based on their advice.

Focus on educating yourself about the fundamentals of crypto and making decisions accordingly. Scammers may also send you emails in the name of legitimate cryptocurrency companies. Avoid replying to any such mail asking for your details for high returns. Never share your BTC or private keys with anyone. 

The bottom line

Cryptocurrency is a way to achieve financial freedom, and the global crypto community is getting bigger with every passing day. The world invested more than $30 billion in crypto in 2021. However, crypto is a high-risk, high-reward game with frequent fluctuations being a part of the game.

Educating yourself about the fundamentals and keeping up with the emerging trends is vital to growing your investment. Crypto aims to put investors in control of their money, but investors should avoid making investments based on hypes or FUD (fear, uncertainty, doubt). 

Crypto is democratising the world of finance by empowering people financially. It is a market where money passes on from weak hands to strong hands. Cryptocurrencies are still evolving with increasing adoption across industries, financial institutions and government bodies.

As an investor, you must be mindful of key developments. Manage your risk by diversifying the portfolio. Invest in utility, growth and adoption of the underlying technology. Educate yourself, talk about utility tokens with your friends and colleagues and think of crypto as a long term investment.