The world of crypto is highly volatile. Huge gains flash across your screen, and stories of life-changing money fill your feed. But before you dive into this diverse landscape, you must have a proper plan. Without set rules and a plan, you may get lost and end up incurring costly losses.
Do you want to invest in crypto but are wondering where to get started? Worry not. Here are some key rules to help you navigate this volatile market.
Never Invest More than You Can Afford to Lose
This is the golden rule and the most vital lesson in all types of crypto investments. Keep in mind that this is not your normal savings account. Crypto is a game of high risk and high volatility. The value of your coins can be cut in half in a day or maybe in a few hours.
If the money you put in crypto investment is meant for next month’s rent, your kid’s school fees, or your emergency fund, you are playing with fire. This approach is totally wrong and can lead to many severe problems. You should only invest money that you can easily afford to lose. In this way, you can sleep well at night, no matter where the market goes.
Pay Attention to the Regulations and News
Crypto is tied to the real world. Even a tweet from a big leader can move markets. And a new law in a major country can also send prices up or down. So you have to stay up to date with the daily crypto market news.
You should set up news alerts for the big coins you own and also follow the trusted sources. Moreover, know what the rule-makers are talking about. Are they planning new laws? Is a big bank getting into the space? All these types of news can affect your money more than any chart pattern.
Stick to the Major Cryptocurrencies
You may hear about the news that a new coin is coming and it will change the world. This may be promoted by a guy on the internet who seems to know it all. Keep in mind that it is just a trap for new people.
When you are just starting trading in crypto, focus on the big names, such as Bitcoin and Ethereum. They have the longest track records, the most users, and the most solid tech. No doubt, they are also not safe, but they are the least risky options in this volatile financial market.
Use Dollar-Cost Averaging
Trying to “time the market” is not the right approach. Even the pros get it wrong. By doing so, you will drive yourself crazy staring at charts, trying to buy at the very bottom and sell at the very top.
However, there is a better way to maximize your returns in crypto investing called dollar-cost averaging. It is a simple rule that you invest a fixed amount of money at a fixed time, no matter the price.
For example, you decided to invest $100 every two weeks. When the price is low, your $100 buys more crypto. On the other hand, when the price is high, it buys less. And over time, this evens out the average price you pay.
With dollar-cost averaging, you stop worrying about the perfect moment and just build your stake slowly and steadily. It takes the emotion out of the game, maximizing your potential returns.
