Cryptocurrencies have been one of the most important most profitable investments in recent years. Despite being a new market, which is affected by extreme volatility and a propensity to manipulation, it is becoming a way to obtain juicy profits, as long as we are aware of the dangers involved and know well what we are doing.
The cryptocurrency market is very new, so it is affected by FOMO, manipulation and high volatility, so it is important to take great care of our investments.
Luckily, there are many factors and analysis techniques that allow us to evaluate good and bad investments, as well as the possibility to know if we can take certain risks when investing in certain cryptocurrencies. For all those users who want to start investing in cryptocurrencies in 2022, here are some tips:
-Education: When investing in cryptocurrencies it is extremely important to know the vehicles and products we are investing in. The technology behind cryptocurrencies is very new and there are concepts unknown to most. It is necessary to know the cryptocurrencies and the projects, as well as to be very clear about the dangers of investing. Just because there is a lot of talk about a coin or it is very cheap does not mean it is a good investment.
-Diversify: The most common thing to do is to invest in Bitcoin and nothing else. Bitcoin is an excellent investment, but there are thousands of options on the market and some of them are also very good. When investing you should not be a fanatic, but have a cool head, which means that you should not put all your eggs in the same basket. It is necessary to study the projects and create a good investment portfolio if we want to maximize the opportunities.
-Diversify, but not so much: Following on from the previous advice, it is also not good to dilute investments too much. An extremely divided portfolio reduces the chances of making profits, especially if the initial investment is not balanced. In small investments, it is best to diversify just enough, while in larger investments, we can diversify more.
-Invest only what we can afford: Many users access this market with a speculative mindset that can be dangerous, leading them to make very large investments, going so far as to invest money that we cannot afford to lose in the hope of increasing our profits. It should never be forgotten that the cryptocurrency market is a very young market and therefore extremely volatile and easy to manipulate, so it is very important to invest only the amount of money that we could afford to lose in the worst case scenario.
-Have a strategy: When investing in cryptocurrencies it is important to have a strategy, both for entry and exit. We must be clear about how far we want to go, what is the maximum period we want to wait and how much we can afford to lose. The most common strategies are short term (days or weeks), medium term (six months to a year and a half) and long term (two years or more).
-Do not buy or sell in fear: Another major problem in the cryptocurrency market is FOMO (Fear Of Missing Out, which means being afraid of missing out on something). The cryptocurrency market works by cycles that respond to users’ sentiments towards an asset, for example, what happened with Dogecoin in early 2021. These cycles can lead to a cryptocurrency multiplying its value by more than 1,000. However, they can also cause it to lose all of its value in the same period of time. When investing in cryptocurrencies, you should never get sucked into coins that everyone else is buying, as you could be making a serious mistake. As we have said, we must study each project and asset, create a strategy and not get carried away by fear. And the same happens when the market plummets, many users get scared and sell their holdings, which leads to further declines. Whenever possible, we should not sell at a loss, unless the project has proven to be a “scam” or we want to be as careful as possible with our capital.