Cryptocurrency is gaining high popularity and becoming an attractive kind of investing, but novice traders and investors are often repelled by the first difficulties. How to take the first step and start trading digital assets and what cryptocurrency to invest in when more and more new coins appear in the market. Ivan Shcherbakov, CEO of Cryptorobotics, told marketbusinessnews.com how to start trading cryptocurrency and make a profit.
First of all, you should always remember that cryptocurrencies are extremely volatile assets. Therefore, you should invest only the money which you are ready to lose forever. Before making any kind of cryptocurrency investment, you need to weigh all the pros and cons, and also take into account how much profit such investments can bring you and possible losses. One of the most famous investors in the world, Warren Buffett, said:
“If you are not willing to tolerate a 50% drawdown, you have nothing to do with investors.”
He meant the stock market. As for the cryptocurrency, this figure can be significantly more, you risk losing here from 80% to 90%.
That is, it is strictly not recommended to invest the last or credit money in this market since there are protracted corrections or the so-called “crypto winters”.
For instance, most cryptocurrencies became worthless dozens of times in 2018-2019. More than 90% of projects related to crypto disappeared in those years, which accordingly led to the loss of investors’ funds. Nevertheless, you can get more profits in the crypto market than in traditional markets, which cannot but attract investors. If we consider the following cryptocurrencies, so we can see these statistics: The growth of Bitcoin (BTC) is about 250% over the past year, Ethereum (ETH) — by 800%, and many altcoins, which over the same period brought over 1000% profitability. Solana (SOL) is among the top 5 in terms of capitalization. This coin cost $2 in November last year, and today it is purchased at $229.33 per coin.
So, what are the most popular types of investments in cryptos? Let’s take a closer look at them
The strategy of venture capitalists
The strategy of venture capitalists is considered one of the preferred types of investment by most investors. The essence of it is to analyze the crypto market, select a dozen attractive projects with high potential of growth for investment and invest the funds in all approximately equal amounts, understanding that several of them will cease to exist in a few years, 2-3, possibly, will be afloat, but they will not bring a good profit, and 1-2 will only pay off the investment costs in the entire ten projects and will also give a significant income.
Ideally, people should invest in 20 or 30 such projects to receive a good result, but this often requires a large staff of analysts or good familiarity with funds, launchpads, and influencers.
IDO, ICO, IFO, IEO, etc.
Speaking about IDO, ICO, IFO, IEO, and other token sales, it is worth noting that a huge number of investors could make hundreds or even thousands of percent of returns this year. However, you should keep in mind that here you can meet a lot of scams. Therefore, in this case, investors need to follow the top launchpad platforms and funds, which can be a filter in this situation, and projects that have passed their underwriting can show good outcomes. In addition, many investors follow various exposed persons on telegrams or YouTube (Carl to the Moon, Blondi CHAIN), take advice from them, and get a good profit. Both of these strategies work well in the bull market.
Portfolio investment
Finally, my favorite strategy is portfolio investing. This type of strategy doesn’t require a lot of time, effort, and attention, despite the fact that the results can be even higher than those who use the first two. There are many different ways to create and manage a portfolio. The simplest one is to hold crypto for 5 years or more. For this, the young projects are not suitable; it is better to take the so-called “blue chips” of the crypto market into this portfolio.
For this strategy, Bitcoin and Ethereum will be perfect. Investors can emphasize 50 to 100 percent of their crypto portfolio to these two digital coins. If you decide to expand it, you can take from 0.5 to 5% of the total investment – DOT, ADA, BNB, FTT, SOL, ATOM, UNI, SUSHI. All of these tokens have strong products, a large community, and a chance of success for the next 5 years or more.
Crypto trading
Surely, if you are involved in trading, you have an opportunity to get more returns than using the hold strategy. Nevertheless, you should take into account the risks and the 90-90-90 rule. This rule means that 90% of traders lose 90% of the deposit in the first 90 days. Without having experience and appropriate knowledge in this field of activity, it is better to use the hold strategy. But if you wish to trade and increase your profit, then you need to pay attention to such products as Copytrading, Autofollowing as well as Signal Trading, which are suitable for both experienced and newbies in the crypto market.
When trading cryptocurrency, it is also necessary to use various functions that allow you to manage risks, such as Stop Loss, Take Profit, and Trailing functions. This means that an order to buy or sell a cryptocurrency will be executed as soon as its value reaches the level you specified. This way, you can increase your chances of making a profit and prevent the risk of losing all your funds.
Conclusion
In the world of cryptocurrencies, there are also many types of investment, among them, such as mining, staking, farming, participation in test networks, NFT, games (GameFi, play to earn). The cryptocurrency market is developing rapidly, ahead of regulation and often common sense. Therefore, summing it up, I would like to remind you of the high risks of losing funds here.
Interesting Related Article: “How Millennials Are Building the Future of Cryptocurrency?“