7 Secrets to Successful Investing in Cryptocurrencies

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The virtual currency market, commonly known as cryptocurrency or crypto, has taken the world by storm. According to Coindesk, there are over 1,300 alternative digital currencies (known as “coins”) in circulation as of January 2018. The explosive growth of this new asset class has caught the attention of investors, entrepreneurs and regulators alike. While the potential for investing in cryptocurrencies is exciting, it also comes with great risk. In fact, many people who have invested in virtual currencies have lost their entire investment. But for those willing to do their homework and think critically about their investment decisions, investing in cryptocurrencies can be a lucrative opportunity. Here are seven tips to help you succeed when investing in virtual currencies:

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Research, research and more research
One of the most important pieces of advice when investing in cryptocurrencies is to do your research. Investing in cryptocurrencies is not like investing in equities or bonds where there is a clear relationship between your investment and the company’s business model. When researching a potential investment, carefully study the company’s product or service, team, market opportunity, competitors, financing model, and degree of adoption. This will help you understand how the virtual currency provides value, who its customers are and the size of the market opportunity. Why is this research important? First, it will allow you to understand the investment decision you are making. Second, it will help you determine whether it is an investment worth making in the first place. There are more than 1,300 virtual currencies currently available and new ones are being created every day. If you are considering investing in virtual currencies, you need to know which ones to invest in and which ones to avoid.

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Diversification is key
Don’t put all your eggs in one basket. Diversification is a critical aspect of any investment strategy and is especially important when investing in cryptocurrencies. The key to successful diversification is to invest in a variety of virtual currencies that are not highly correlated with each other. This will help mitigate the risk that one of your investments will fail and cause you to lose money across your entire portfolio. If you are new to investing in cryptocurrencies, it is best to start with a small amount of money so that you can learn through trial and error. Once you have developed a successful strategy for investing, you can increase the amount of money you invest. Diversification will allow you to reduce your overall risk.

Know the risk
It’s important to understand that investing in cryptocurrencies comes with significant risk. First, the market is largely unregulated and prone to manipulation. This can make it difficult for investors to accurately determine the value of different virtual currencies. Second, virtual currency exchanges are prone to hacking and theft. Third, the regulatory environment is uncertain and can change at any time. For example, the SEC recently issued a notice on “investor risks” associated with initial coin offerings. This can make it more difficult to raise money through an ICO, which is one of the most common ways to distribute a newly created virtual currency. If a virtual currency is not regulated as a security, it is not subject to the same level of disclosure and oversight as traditional investments. This lack of transparency can make it difficult for investors to accurately assess the risk of different virtual currencies.

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Use Stop-loss orders
A stop-loss order is an instruction to sell a security once the price reaches a pre-determined level. A stop-loss order can be incredibly helpful if you have a large investment in a single virtual currency. While diversification can help lower your overall risk, it is not a foolproof strategy for protecting against losses. If the price of a single virtual currency in which you have a large investment declines significantly, it may not be able to recover. This can be especially problematic if you have a lot of money invested in this single virtual currency. A stop-loss order is designed to protect you from such a situation by automatically selling the virtual currency at a pre-determined price to minimize your loss. If you decide not to use stop-loss orders to limit your risk, you can keep track of the price of different virtual currencies using websites such as CoinMarketCap.

Don’t let emotions drive your decisions
It can be easy to get caught up in the excitement around virtual currencies and want to invest all of your money in this new asset class. However, it’s important to remember that investing is not a game. Cryptocurrencies are subject to the same economic forces that influence other investments. So while the price of a virtual currency may increase while you hold it, it is likely that at some point its price will decline. It is important to remain calm and rational when the market is experiencing significant price swings. When the price of a virtual currency you have invested in decreases, it can be easy to make impulsive decisions. It is important to resist the urge to sell when the price is falling and have a clear investment strategy for when it will make sense to sell your virtual currencies.

Only invest what you’re willing to lose
It’s important to understand that when you invest in cryptocurrencies you are putting your money at risk. It is possible to lose your entire investment and there is no guaranteed way to earn a profit. While investing in cryptocurrencies can be a lucrative opportunity, it also comes with significant risk. It is important to only invest what you are willing to lose. This will help protect you against the risk of losing your entire investment.

Conclusion
Cryptocurrencies have captivated investors and entrepreneurs around the world. While the potential for investing in cryptocurrencies is exciting, it also comes with great risk. In fact, many people who have invested in virtual currencies have lost their entire investment. But for those willing to do their homework and think critically about their investment decisions, investing in cryptocurrencies can be a lucrative opportunity. When investing in cryptocurrencies, it is important to do thorough research, diversify your portfolio, use stop-loss orders, avoid letting emotions drive your decisions and only invest what you are willing to lose.