6 Investment Tips for Crypto Market Investors

July 20, 2022

The crypto market has taken people from rags to riches. At the same time, we have seen people lose more than half their wealth. It can seem crazy how a small tweet from the likes of Elon Musk can reverse the market gears. As though he is in the driver’s seat deciding the market’s final destination. This volatility and uncertainty can make even the most seasoned crypto investors and experienced traders doubt their investing abilities and feel apprehensive about the market.

Does it mean you should sit on the sidelines out of fear while watching your friends increase their wealth in leaps and bounds? Definitely not! The last thing we want to miss out on is a good investment opportunity. You don’t want to end up beating yourself for buying more cryptocurrencies.

So then, what should you do? Here are six cryptocurrency investment tips to help you make the best investment decisions.

1. Invest What You Can Afford To Lose

This is sound investment advice, but what does that mean? Does it mean you will lose what you invest? We do not mean to imply that you would lose the entire amount. We want to say that it would be prudent to start investing with that underlying assumption. Assuming that you could lose the whole amount would caution you to invest only your spare money. That’s the amount left with you after meeting all your financial obligations.

This involves some levels of budgeting. All you have to do is list all the near-term expenses and short-term and long-term goals.

Your near-term expenses can be:

Mortgage payments, groceries, paying insurance premiums, etc.

Your short-term goals might be something along the lines of:

Buying a new Tesla car, a vacation to the Maldives, and whatnot.

And your long-term goals could be:

You get the idea of saving enough for a child’s education and owning a luxurious house.

So now that you know how much expenses you might incur in the future, you can plan your crypto investments accordingly. If you are a risk-taker, you can decide to fund your long-term goals by planning to grow your wealth through crypto investments. If you want to play it safe, invest in other securities to finance all your goals and use the amount left for your crypto investments.

2. Be An Active Investor

Your job will not end once you invest the money in the crypto market. You should not just assume you can sit back and relax while your money grows. You must track the market often because, as we said earlier, the crypto market is highly volatile. You might miss out on your most extensive buying or selling opportunity. Being an active investor would include you having to rebalance your investments.

It all boils down to consistently reacting and taking action toward the market news and indicators. This means you might want to reduce your stake in one cryptocurrency and increase your stake in another. Sometimes, you might have to ultimately sell your crypto investments to profit from the market peak and later repurchase it once the market falls. Know more about crypto investments at BitIndexAI.

3. Resort To Averaging

Well, averaging can be your best friend or your worst enemy. It depends on what you want to make of it. In simple terms, averaging is buying or selling more cryptocurrencies at every market dip or when the market makes a new high.

Let’s say the market is reacting to the news and starts to fall, but you believe it will soar to new heights over the long run. What you can do is buy on every dip. This would eliminate the chances of missing out on a good buying opportunity and lowers your average cost per cryptocurrency and selling.

Yeah, tough luck! If you believe the market might fall anytime but is increasing in the short term, you can sell portions of your investment each time the market makes a new high. However, you should stay cautious and have a predetermined exit strategy if the market decides not to favour you.

4. Do Not Put All Your Eggs In One Basket

This old yet imperative investment advice holds even with cryptocurrency investing. One of the rookie mistakes you could make would be to put all your money in just one or two cryptocurrencies. You would be exposing your entire investment to the risks associated with just a few cryptos, which is not prudent.

To give you a real-life example, a tweet from Elon Musk caused Dogecoin prices to soar. If you had ended up investing your entire savings right before there was a sell-off, you would have lost a lot of money you invested. But if you had diversified your investment to multiple coins, even if Dogecoin performed terribly, the other currencies performing well would offset the losses. And you wouldn’t feel the pinch as you would have in the previous scenario.

5. Do Your Due Diligence

Are you someone who loves to jump on people’s advice? Hold your horses just yet. Unless you are consulting an expert, always do some research on the cryptocurrency. Dig deeper into the coin’s purpose and future goals and weigh it against its peers to determine if the particular crypto is worth investing in. Do not be that guy who listens to a stranger or a friend’s advice blindly, only to end up cursing them. We aren’t asking you to discount or undermine someone’s advice.

For all you know, they might have some precious information. We are asking you to fact-check if the advice is best for you. It would be best if you also kept in mind that the investment strategies that work for your friend may not be your best. This is simply because everyone has a different risk appetite. It would help if you considered your risk tolerance.

6. Don’t Invest Against The Market

Make the trend your friend! If the market is continuously falling each day and you aren’t sure about the future direction, it’s better that you don’t buy into such a trend yet. Always wait for some signal which says there is a potential trend reversal. The signs could look like two to three days of upside movement and heavy buying volume, to name a few.

Learning to read chart patterns would be handy in making investment decisions if you plan to become a long-term crypto investor. This process is called technical analysis, and investing time into learning this skill would pay dividends in the future.