Cryptocurrency investing has become popular in the last year due to the unexpected rise of Bitcoin and various altcoins such as Zcash, Ethereum and NEO. While Bitcoin did reach a value near $20,000, it crashed back down to the $6000 range. If you are interested in this new asset class, here are some helpful tips that you can use to invest:
Plan Your Crypto Investment
The first step that you should take when investing in cryptocurrency is to decide the amount of fiat that you want to invest. Obviously, the space is much more volatile than Forex or the stock market. You have to know what you are willing to lose if your total portfolio starts to drop in price.
Spreading your risk into different crypto is also a good idea. You may want to have 10 to 20 different names in your portfolio. This could be a mixture of big caps and small and medium caps.
The smaller cap coins will have more volatility. When institutions enter the space, they will probably purchase big caps first, since they can put more of their money to work by using that strategy.
You will have to determine which plan is right for your risk tolerance. Typically, the top 20 coins behind Bitcoin will be some of the safest.
Making Your First Cryptocurrency Investment
When you decide to make your first investment, you can use an exchange like Coinbase to turn your fiat to Bitcoin or another altcoin. After you load your wallet, you can transfer your crypto to a larger exchange with more names. Binance has become a respected and popular exchange with hundreds of coins listed.
Protecting Your Portfolio
You have a few different choices available for protecting your portfolio. You may want to decide to buy a hardware wallet. This is an encrypted device that you hold. It is one of the safest ways to keep your portfolio protected.
You can also download a wallet onto your PC and store your coins in that. The challenge is that it usually is not encrypted. Another option is to hold your coins on an exchange. This is the least safe option as you won’t have access to your private keys.
Some other good ideas to use when you are choosing names is to conduct research on their website and see what they are about. Do they have goals that they are following? Is the development team active?
By using these tips, it should help you build your portfolio. Have a plan and stick with it.