Cryptocurrency Investing Tips That’ll
Help You Secure a Profit
Crypto investments, like all other forms of investments, are profit-oriented. If you’re pumping money into a bearish market, you’re sure to lose a lot of money.
You’ve probably heard harrowing tales of formerly wealthy investors losing their fortunes in wrongly-placed crypto portfolios. The cryptocurrency market is highly volatile, and there’s really no fool-proof way to tell the direction where the coin trend will tend.
Token values jump up without warning, with lucky investors quick to rake in their profits before a downward spiral launches a buying spree as other people seek to buy low. Crypto is a tricky investment and should be done with carefulness and all of the required knowledge.
Despite market volatility, many people globally have found ways to earn in crypto by following specific strategies. No matter the technique or approach, the ideal are the same. And they form the essential tips that will help you secure a profit.
Here are some of them:
Diversify your portfolio
The volatility of the crypto market cannot be overemphasized. To directly counter the adverse effects, every serious investor must diversify their portfolio.
At present, only two tokens have demonstrated enough strength to convince everyone of the utility of their value, i.e. Bitcoin and Ethereum. Both tokens are the most traded, and therefore the most liquid assets in the cryptocurrency market. Their values may not swing as wildly as some other tokens, but they still aren’t stable coins.
To get the best value and make a profit no matter the market trend, it is vital to diversify your portfolio by investing in multiple tokens. For example, you can choose to buy Bitcoin, Solana, and Tether.
Not diversifying your portfolio is akin to putting all your eggs in one basket. All it takes to topple it is the wrong downward trend of a bearish market. To avoid unfortunate scenarios like this, it is ideal to invest in different promising tokens.
Participate in airdrops
Airdrops are essentially freebies. The same way you wouldn’t turn up your nose at free money is how you should be enthusiastic about airdrops.
Airdrops are promotional giveaways of tokens by developers. They are usually done for new tokens and projects seeking more users and trading activity. You don’t get Bitcoin or Ethereum airdrops every day. But you can look out for some unique new tokens.
Who knows, the value of the supposedly obscure coin you’ve bought could actually gain in value, similar to Solana’s meteoric rise.
However, this is not to say that you should invest primarily in obscure coins. There are hundreds of tokens out there whose value will probably never rise. And there are even more coins and projects that are scams. You have to beware of these too.
Have a buying and trading strategy
The most successful crypto traders have honed different strategies to make a profit. There is no size-fits-all solution here. Each strategy is borne from many months of carefully observing the market, and one’s own portfolio, until one has gotten the knack for making profitable transactions.
HODLing is a common strategy used by investors. They buy a token at its floor price and then wait until its value increases significantly before selling it. Such a strategy can prove effective. However, it’s more suited to mid to long-term investors. If you want to make a profit in the short term, you may want to consider other strategies.
Also, it may not be advisable to buy a coin simply because its value has dropped. Some coins are known to perform poorly year-round, even if there are small spells where the price briefly jumps.
If you’re buying a token because the price is low, don’t be surprised to see it go even lower.
Lending and staking
Staking is a method of validating cryptocurrency transactions. When you stake assets, they are tradeable. Rather, they are locked within the blockchain, with a proof-of-stake consensus protocol using it to validate on-chain transactions.
The coins remain in a wallet while you earn rewards equivalent to how much you’ve staked. Essentially, you’re lending your tokens to the network. The network uses the coins to verify transactions and maintain security while you earn a passive income on the side.
The arrangement is similar to interest earned on a bank credit balance. Lending and staking are only possible on blockchains that use the PoS algorithm. The more tokens you stake within the network, the more you’ll earn.
PoS is slowly replacing the energy-intensive proof-of-work consensus protocol used by networks like the Bitcoin blockchain. Instead of relying on miners, the algorithm affects transaction validation based on staked tokens. It’s a cheap method compared to the parallel alternative.
In addition, you can invest in DeFi lending ecosystems that allow you to lend and earn interest on the loans. All you have to do is to contribute a trading pair to the liquidity pool. Anytime someone borrows a token involving any of your tokens, you earn a small commission.
Watch out for ICOs
Initial coin offerings preceed the launch of a crypto project. The success of a token’s ICO will greatly determine whether it will be a profitable investment or not. ICOs are a great investment opportunity. However, you still have to exercise caution.
A new coin is a high-risk investment. In such a situation, your best bet would be to conduct as much research about the project and its developers before splurging cash to buy it. Not all tokens are listed on every exchange, and the last thing you want is to be stuck with an asset whose liquidity is low.
If the new coin is listed on the major exchanges, you can easily map out a potential growth chart based on its trading volume.
Learn the basics of crypto value appreciation
Although cryptocurrency trends are not very predictable, they aren’t rocket science either. The market forces are too many to consider individually. However, any serious investor should make effort to understand the basic factors that affect the value of a token.
Understanding this phenomenon can help you secure profit even as others count their losses. Tokens gain value on crypto exchange platforms, and the primary determinants for these trends are the demand and supply of the token.
Market liquidy is the rate at which tokens are traded on an exchange. A market with relatively low trading volume has low liquidity, while a market with high trading volume has high liquidity.
A token’s supply depends on the project structure, mining potential, and the willingness of asset owners to trade it.
On the other hand, a token’s demand rate is reliant on several factors. One main reason for the value appreciation of a cryptocurrency is its utility and the efficiency of its blockchain. For example, a token that offers low trading fees and speedy transactions has increased demand.
Also, as smart contracts become a primary feature of altcoin blockchains, their increasing popularity may also lead to increased demand for the token.
Like any other financial market, the value of tokens is reliant on the perception of their value. This is why people like Elon Musk have influenced the trend of tokens in recent times. With crypto, values are more about ascribed utility than any inherent usefulness.
Finally, other hidden factors influence the tokens' demand, supply, and value. To rake in profit as an investor, you have to understand these basic concepts. Another great tip for staying in the financial green is to use a profit loss calculator.
It’s also ideal to sign up to dedicated crypto platforms like CoinStats where you can manage your portfolio all from one dashboard.