Guidelines for Crypto Investment

The world of cryptocurrency has garnered a lot of attention, particularly among the younger generation. According to the Henley and Partners Crypto Wealth Report, as of September 5th, 2023, there are about 88,200 crypto millionaires worldwide. However, navigating the complexities of the crypto market can be a daunting task. With so many currencies to choose from and various factors to consider, it’s crucial to have a solid understanding of what to look for before investing. This comprehensive crypto investment guide will provide you with the necessary knowledge to make informed decisions and set you on the right path towards a successful career in the world of cryptocurrencies.

Related: How to invest in cryptocurrencies in 2024

Aspects of Crypto Investment Guide

Following are the main aspects of crypto investment guide:

1. Analyses

Analysis is a main aspect of trading/ investment markets whether it be forex, cryptocurrencies, or stock market. It enables a trader to analyze various aspects of a market and able him/her to conclude a trade or investment. Cryptocurrencies follow the same tradition.

a. Fundamental Analysis

Fundamental analysis is the study of all the factors/ variables affecting a cryptocurrency to determine its value and future trajectory. Both the forex and crypto markets are very sensitive to their variables but the fundamental analysis of crypto market is different from forex market because the variables/factors are different. These factors include background of developing team of cryptocurrency, use case, type of cryptocurrency, and white paper.

Related: How to improve Fundamental Analysis

b. Technical Analysis

Technical analysis is the study of charts, trends, and patterns to deduce future market trends. This is the same for crypto market, forex market, and stock market. Understanding charts plays a crucial role in technical analysis. Candlestick charts give maximum information about market conditions, moreover, bar charts and line charts are also important.

Other factors of technical analysis include optimal use of indicators like Bollinger Bands, Parabolic SAR (Stop and Reverse), MA (Moving Average), Relative Strength Index (RSI), and Moving Average Convergence Divergence (MACD). Lastly, identification of key levels – resistance level and support level complemented with the above factor helps in making informed decisions for making entries.

Related: How to learn Technical Analysis

2. Diversification of Profile

You might have heard about the famous proverb “Don’t put all your eggs in one basket”, it is one of the core principles of economics, especially in making investments. Diversification of profile means making investments in different assets rather than putting all the money in a single asset. Wisely do research considering the nature of cryptocurrency, smart contracts, and use-case to choose your asset. According to the Bitcoin Market Journal, the 80/20 rule is best for an optimized profile. The 80/20 rule means 80 percent of your investments should go to already established cryptocurrencies (large market cap like BTC ETH etc) mostly in the top 10, whereas 20% of your investments should go to well-researched other potent cryptocurrencies.

Related: Types of cryptocurrencies

3. Devise a Risk Management Strategy

Diversification is one of the ways to manage risk, however, there are many other factors involved in a complete risk management strategy. In risk management strategies, psychology plays an equally important role as mathematics. Setting a target is crucial, as following a target is comparatively easier than making random free-floating trades.

It is important to have a clear mind about bearing potential loss for a trade/investment, do not cross your stop loss limit. Lastly, emotional decisions during favorable or difficult periods should be avoided, instead of panicking, focus on your strategy and analyses.

Related: 12 best-performing cryptocurrencies of 2023

4. Long-Term and Short-Term Planning

Cryptocurrency trading can be quite complex, and it requires a solid strategy to be successful. To make the most of the market, a trader needs to have both long-term and short-term planning. Long-term planning involves holding a cryptocurrency for an extended period, usually for a year or more. On the other hand, short-term planning includes short-term trades like spot trading, day trading, and swing trading.

Related: Future of cryptocurrencies: Challenges and Opportunities

A long-term strategy is more fruitful when an investor is ready to invest more when the market is bearish. In this way, they can lower the average cost of their purchases and maximize their returns over time. Crypto is among the most volatile markets, so it is better to opt long long-term investments, according to Statistica, prices of Bitcoin rose from 3,810 USD in Dec 2018 to 43,745 USD on 10 Dec 2023. It is an increase of 1148% in five years.

5. Keep Yourself Informed

To concur crypto market, a trader needs to stay informed about market trends and news. There is a plethora of online sources available that provide high-quality updates about the crypto market and blockchain technology. People mostly focus on acquiring signals rather than putting in their efforts, these signals may give you some profits for some time but in the long term, you won’t be able to comprehend the market ultimately making you dependent on such sources. People sell signals on online platforms, and the cost will add up to your investment, so it will take longer than expected time for break even.

Some of the best news outlets for crypto and blockchain news include CoinDesk, CoinGecko, Blockworks Cointelegraph, UToday, Decrypt, Bitcoinist, etc.

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6. Ensure the Security of Your Digital Assets

The fast-paced evolution of cyberspace and cyber security encouraged hackers to find new ways to breach it. The security of digital assets should be of prime importance. If a trader is using crypto trading platforms like Binance, Kucoin, etc. He/she should use strong passwords and add an additional layer of two-step verification or Google authenticator. However, external wallets are recommended for maximum security. One can choose the most suitable wallet according to his/her priorities by doing some research.

One of the most common challenges associated with using external wallets is the issue of forgetting passwords. Research has shown that almost 20% of Bitcoin is lost primarily due to this reason. Additionally, a recent study by Crypto Asset Recovery revealed that Bitcoin worth 272-545 million USD was lost in 2022, and the major reason behind this was again forgetting passwords. This highlights the importance of being extra cautious and implementing strong password management practices when dealing with cryptocurrencies.

7. Engage in Crypto Community

Engaging in a community of a field helps a lot in learning about the field. There are hundreds of thousands of platforms available especially on social media apart from the abovementioned websites. An aspirant can join an online course to get help from experts in the market. You can join a WhatsApp group, Telegram group, or Facebook page to broaden your knowledge base and trading skills. These platforms provide an added opportunity of learning from experienced traders, moreover, if you successfully get the individual mentorship of an experienced trader, it will be a cherry on the top.

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8. Practice and Self-evaluation

Only practice makes a man perfect, there is a huge difference between learning something in theory and practically implementing it. A trader only comes to know many innate/ intrinsic psychological behaviors when he/she starts trading. A trader has to practice his strategies and knowledge on demo accounts before actually starting it with a real account. Practice is futile unless a trader evaluates himself/herself and tries to learn from mistakes. Crypto is a highly volatile market, you will face setbacks, losses, and sometimes hopelessness but this is a time when you can put your efforts into refining your strategy. One should identify dos and don’ts by learning from experience.

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9. Emotional Discipline is most Important

I have put this in the last so that after reading this article it should stick in your mind for a long time because it is one of the fundamental aspects of crypto investment guide. The crypto market is highly volatile, and emotional stability for a steady career is of prime importance. For instance, Bitcoin plummeted below 15000 USD in the middle of 2023 and rose to above 45000 USD towards the end of 2023. This shows how volatile the market is and in such a market psychological stability and self-confidence are very important.

Bottom Line

Crypto market is both complex and highly volatile. One has to be good to a certain level to get success in the crypto market. Crypto Investment Guide briefly provides the aspects that will help you a lot in your crypto journey. These aspects include learning strategies, identifying typologies of cryptos, devising and fine-tuning your strategies, and lastly, implementing them in real-time scenarios.

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