Seven Rules Every Crypto Investor Must Follow
You may be wondering things like, “Should I spend my hard-earned money in this flourishing financial market?” or “Is Bitcoin real?” or “Did the Bitcoin bubble burst in the 2022 market crash?” or “Are Cryptocurrencies over-hyped?” in case these questions are bothering you then following article is essential reading for you.
Cryptocurrency and Volatility
The burden of responsibility is something that comes along with achieving financial freedom. When it comes to investing in cryptocurrencies, we are aware that the industry is still in its infancy, experiencing explosive growth, and that its leaders envision it as the financial system of the future. Nonetheless, at the same time, it has its weaknesses, which crypto investors need to be conscious of at all times.
The most significant obstacle that investors must overcome is the risk of becoming distracted by the noise connected with a particular asset. It is extremely important to avoid getting caught in the hype, even though it is nearly impossible to ignore. Due to the lack of oversight from regulatory bodies, the cryptocurrency market is characterised by a greater degree of volatility than any other asset type. As a result, prospective crypto investors need to familiarise themselves with the project whitepapers and spend time learning about the available investment prospects.
Enlighten your Journey as an Crypto Investor
Whether a beginner or an avid crypto investor, something new is always happening in the crypto world. Here are a few things that prove beneficial for new and experienced crypto investors:
Importance of asset allocation
Although well acknowledged, the significance of asset allocation can never be overstated. The only way to develop and maintain wealth is to do so, regardless of how simple or challenging this may appear. Only invest in cryptocurrency once you have a thorough understanding of both the underlying technology and the risk. You should only put some of your money into a single category of assets, just as you should never do with any other investment. In this scenario, it would be best if you didn’t place a wager on a meme coin. The crypto portfolio should include initiatives in prominent industries like NFTs and DeFi, as these are the safest picks for diversification. However, monitoring position size is necessary to cut down on losses.
Love or hate crypto, but don’t shun it
One may or may not like/understand crypto, but pay attention to it. Cryptocurrency is technologically a step further into the future and should be embraced. Back in the Past, the stock market was considered a gamble. However, it is now an investment avenue and also one of the sources of mainstream revenue. Investment is purely choice-driven, but awareness is imperative.
Follow the 5% rule
The 5 per cent rule implies that one should only invest what one can afford to lose. The government stands true for the stock market as well. However, the crypto market is still relatively new, and one must bear in mind their risk appetite and understand the market’s potential and volatile nature. Just as certain coins have the potential to give overnight returns, a few also fell 60-70 per cent overnight. Even blue-chip currencies like Bitcoin are trading relatively lower than their all-time highs.
Unhear the Noise as crypto investors
There are two sides to the cryptocurrency coin. One side includes the population in growing numbers that believe in the financial prospects of the crypto-ecosystem. The other is with many new-age financial influencers and media houses preaching that cryptocurrency is over-hype speculation, a fad, or a pyramid scheme. Both sides make screaming noises. Choose your side wisely. To be a successful investor, you must ignore the noise around you, choose your product wisely, and then hold what you buy and believe.
Understand the uses of both hot and cold wallets
One must keep the cryptocurrency safe in a digital wallet at all times. There are two varieties of digital wallets: hot wallets and cold wallets. Both are require to store digital currency. Investors prefer hot Wallets because they are user-friendly and can be access online. On the other hand, cold wallets offer access even when users are not online. Also, the ease of use of hot wallets renders them more susceptible to being hack. Above all, cold wallets cannot be broken into if they are properly prepared.
The most effective strategy for using wallets is to keep small quantities of cryptocurrency for everyday use in a hot wallet. Whereas, one must keep larger amounts of cryptocurrency in cold wallet for long-term storage.
Create your crypto index
Like the stock market, the crypto market has blue-chip, large-cap, mid-cap, small-cap, and penny coins. You must know that cryptocurrency allows fractional ownership too. As a beginner, one should limit their investment to blue-chip coins, such as Bitcoin, Ethereum, Binance (BNB), Polygon, etc. Please read LotusX’s guide on the Top 10 cryptocurrencies.
Perform your due diligence
You have access to a reliable resource. Thanks to the abundance of whitepapers published on the subject of all the heavily traded cryptocurrencies. Whitepapers are a terrific way to gain insight into a topic. The internet makes it easy to find and access them. Before putting any of your money into a possible investment, you must brush up on your expertise in this modern digital age. Making financial investments without conducting adequate research is like plunging headfirst into the water without a life jacket or the ability to swim.
The value of cryptocurrencies have skyrocket in recent years, and they are expected to continue their upward trend shortly. Despite this, the widespread use of cryptocurrencies and blockchain technology is only just beginning to emerge from its infancy. Be at ease; to be successful in the crypto market over the long run, you need to temper your excitement and adopt a systematic approach to investing in cryptocurrencies.